China Lead-Acid Battery Market StudyChina will put lead-acid battery consumption tax into effect in 2016, which will push up costs for Chinese lead-acid battery producers. This move

China Lead-Acid Battery Market StudyLead & zinc team at SMM

Oct. 2015

Number（and（Capacity（of（Lead-acid（Battery（Producers（

Number（and（Capacity（of（Lead-acid（Battery（Producers（

1.5

2

2.5

3

3.5

1000

1500

2000

2500

3000

Unit: 100 million kvahNumber of producers

© SMM. All rights reserved.

� Recent years have seen dramatic changes in the number and capacity of lead-acid battery producers.

� The number and capacity of lead-acid battery producers surged during 2005-2010, but most producers were small-scaled ones during the period. China issued the Lead-Acid Battery Industry Entrance Requirements (short as Entrance Requirements) during 2010-2015, which sets thresholds for entry into the industry. The number of producers unqualified under the Entrance Requirements shrank significantly, while qualified producers expanded capacity aggressively.

0

0.5

1

0

500

1000

2005 2010 2015E 2020E

Number of producers Capacity

2

Source: SMM

Changes（in（Company（Scale（2005-2015E

Lead-acid（Battery（（Output（and（Share（by（Type（

60%30%

10%

2005

70%

24%

6%

2010

70%

20%

10%

2015E


� Under the Entrance Requirements, annual capacity for existing lead-acid battery producers must ≥ 200,000 kvah, and annual capacity for new lead-acid battery producers must ≥ 500,000 kvah, and annual capacity for existing polar plate producers that produce polar plate for sale must ≥1 million kvah. In 2012, lead-acid battery producers whose annual capacity were less than 200,000 kvah took up 71% of total lead-acid battery capacity.

� Capacity at lead-acid battery producers expanded gradually after the Entrance Requirements took effect. The definitions of small, medium and large producers changed dramatically during 2005-2015.

Source: SMM

3

small companymedium company large company



Definition 2005 2010 2015ESmall <100,000 <200,000 <1000,000Medium 100,000-200,000 200,000-500,000 1000,000-5000,000large >200,000 >500,000 >5000,000Unit： kvah

Lead-acid（Battery（（Output（and（Share（by（Type（

Lead-acid（Battery（（Output（and（Share（by（Type（2005-2020E

40%

60%

80%

100%

0.64

0.96

1.28

1.6

Unit: 100 million kvah


� Lead-acid battery capacity expanded rapidly over the past decade or so, leading to overcapacity and negative impact. Motive lead-acid battery –40% of total lead-acid battery capacity – is affected the most. Lead-acid battery production growth is likely to continue slowing down in coming five years or even enter negative territory.

Source: SMM

4

0%

20%

0

0.32

2005 2010 2015E 2020E

Lead-acid battery output Ignition type Motive type Backup type Growth rate

Lead-acid（Battery（Capacity（Distribution

Lead-acid（Battery（Capacity（Distribution

Jiangsu

Shandong

Anhui

Hebei

Henan

Zhejiang

Hebei

Hubei

Jiangsu

Anhui


� Lead-acid battery capacity is shifting from east China to central part of the country in recent years due to various factors. Hebei, Hubei and Anhui have become major lead-acid battery producing regions.

� Zhejiang, Hebei, Hubei, Jiangsu and Anhui were China’s top five lead-acid battery producing regions in H1 2015.

5

Fujian

ZhejiangHubei Anhui

Guangdong

Guangdong

Henan

Fujian

Shandong

Source: SMM

Qualified（Lead-acid（Battery（Producers

Producers（Qualified（for（Lead-Acid（Battery（Industry（Entrance（Requirements

100

200

300

400

500

Unit: 10,000 kvah


Currently, 27 producers are qualified for the Entrance Requirements, whose polar plate capacity is 43.95 million kvah and assembly capacity is 38.29 million kvah.

Source: SMM

6

0

100

6 producers in Zhejiang

6 producers in Jiangsu

2 producers in Anhui

4 producers in Jiangxi

2 producers in

Guangdong

3 producers in Hebei

2 producers in Henan

1 producers in Guangxi

1 producers in Hubei

Lead-acid（Battery（Outdated（Capacity（Elimination

Time List Number（of（producers

Capacity（ 10,000 kvah

Polar plate Assembly（

Jul.（11,（2012 1st（ 92 1541.195 1495.975

Sept.（7,（2012 2nd（ 22 126.4 94.94

Jul.（18,（2013 1st 44 779.92 816.89

Lead-acid（Battery（Capacity（Elimination

Lead-acid（Battery（Producers（Required（to（Eliminate（Outdated（Capacity（


Jul.（18,（2013 1st 44 779.92 816.89

Sept.（9,（2013 3rd 11 629 311

Jul. 8,（2014 1st 39 848 531

Aug.（12,（2014 2nd 17 970 566.7

� During 2012-2014, the Ministry of Industry & Information Technology (MIIT) released six lists of lead-acid battery producers required to eliminate outdated capacity. These lists target 225 producers, involving polar plate capacity at 48.945 million kvah and assembly capacity at 38.16 million kvah.

Sources: SMM, MIIT

7

Lead-acid（Battery（Cost（Structure（

Motive（Lead-acid（Battery（Cost（Structure Traditional（Battery（Production（Process（ 12V-12AH

20

40

60

80

100

Unit: RMB/piece


� Lead-acid battery contains about 70% of lead. As such, changes in lead prices could have significant impact on lead-acid battery costs. Excluding unusual factors, battery sales prices change correspondingly once changes in spot lead prices exceed RMB 1,000/mt.

� The Entrance Requirements bans use of traditional battery production process for newly built, upgraded and expanded projects, effective January 1, 2013.

8

Source: SMM

0

20

总成本铅及铅合金辅料能耗人工售后其他成本

LaborSupplementary materials

Total cost OthersEnergy After-sales service

Lead & lead alloy


Motive（Lead-acid（Battery（Cost（Structure（ Enclosed（Battery（Formation（Process（ 12V-12AH

Lead-calcium（alloy Rare（earth（alloy（Unit: RMB/piece

Energy

Labor

After-sales service

Others


� Enclosed battery formation process, also called cadmium-free enclosed battery formation process, operates in such a way that battery polar plate is solidified and dried before being cut into pieces for assembly and charging is completed in the final stage.

� Compared with traditional process, cadmium-free enclosed battery formation process uses 90% less water and 25.8% less electricity, reduces costs by 15% and occupational disease by 90%. Enclosed battery formation process conforms to the entrance requirements and is environmentally friendly as it adopts lead-calcium alloy, unlike traditional process that uses cadmium and arsenic.

-100 -80 -60 -40 -20 0 0 20 40 60 80 100Source: SMM

9

Lead & lead alloy

Total cost

Supplementary materials

Energy


Automotive（（Ignition（Battery（Cost（Structure（100AH

Dry（charged（ Maintenance-free（Unit: RMB/piece

Energy

Labor

After-sales service

Others


-400 -300 -200 -100 0 0 100 200 300 400

� The Entrance Requirements bans new, upgrade and expansion projects for dry charged lead-acid batteries, namely lead-acid batteries which are filled with electrolyte only before use and whose polar plates are dry and in state of charge.

� Major battery manufacturers, such as Fengfan Co. and Camel Group no longer produce such batteries.

11

Source: SMM

Lead & lead alloy

Total cost


Energy

Motorcycle（Ignition（Battery（Cost（Structure（7AH


Dry（charged（ Maintenance-free（Unit: RMB/piece

Energy

Labor

After-sales service

Others


� The Entrance Requirements bans open-type lead-acid battery acid projects, i.e. battery that emits SO2 into the air when in use.

-100 -80 -60 -40 -20 0 0 20 40 60 80 100

12

Source: SMM

Lead & lead alloy

Total cost


Energy

Lead-acid（Battery（End（Use Electric（Bicycle（(E-Bike)

E-Bike（Ownership（

E-Bike（Ownership（1 2

Company（Capacity（

10,000（kvah

Expansion（plans（

TiannengGroup（

Unit: 10,000 e-bikes Unit: 10,000 kvah

Capacity（and（Expansion（Plans（at（Major（E-Bike（Lead-Acid（Battery（Producers

20

25

20

25


TiannengGroup（

ChilweeGroup

A

B

C

D

E-bike production and sales recorded negative growth for the first time in 2014 after years of rapid growth.

13

Source: SMM

0

5

10

15

0

5

10

15

2005 2010 2015E 2020EE-bike output E-bike ownershipLead-acid battery demand

Lead-acid（Battery（End（Use Automobile（

Automobile（Ownership（

Automobile（Ownership（1Capacity（and（Expansion（Plans（at（Major（Automotive（Lead-Acid（Battery（Producers（2


10,000（kvah


Fengfan Co.15

20

25

15

20

25

Unit: 10,000 automobiles Unit: 10,000 kvah


Fengfan Co.

Camel（Group

A

B

C

D

Traditional automobile market slowed. China had reported declines in month-on-month and year-on-year growth of its automobile production and sales for three consecutive months since May 2015. China’s automobile production and sales registered less than 1% YoY growth January-July, well below 3% growth forecasted for the entire year of 2015.

14Source: SMM

0

5

10

15

0

5

10

15

2005 2010 2015E 2020EAutomobile outputAutomobile ownershipLead-acid battery demand

Lead-acid（Battery（End（Use Motorcycle（

Motorcycle（Ownership（

Motorcycle（Ownership（Capacity（and（Expansion（Plans（at（Major（Motorcycle（Lead-Acid（Battery（Producers


10,000（kvah


Guangdong（Dynavolt

1 2

Unit: 10,000 motorcycles Unit: 10,000 kvah

15

20

25

15

20

25


DynavoltPower（

Technology（Co.

Tinjin Yuasa（Batterise Co.

A

B

C

Motorcycle production registered negative growth for several consecutive years as local government restrict or ban motorcycle use. Two-wheel motorcycle, in particular, reported the largest production decline.

15

Source: SMM

0

5

10

15

0

5

10

15

2005 2010 2015E 2020E

Motorcycle outputMotorcycle ownershipLead-acid battery demand

Lead-acid（Battery（End（Use Base（Stations（

Number（of（Base（Stations

Number（of（Base（StationsCapacity（and（Expansion（Plans（at（Major（Energy-Storage（Lead-Acid（Battery（Producers


10,000（kvah


NaradaPower（

21

Unit: 10,000 communication channels

Unit: 10,000 kvah

20

25

30

35

20

25

30

35


Power（Source（Co.

Shandong（Sacred（Sun（

Power（Sources（Co.

A

B

C

The MIIT issued 4G TD-LTE licenses to China Mobile, China Telecom and China Unicom – China’s three telecom giants – in December 2013. This allowed the number of base stations to shoot up in 2014, which will continue boosting demand for batteries used in telecommunication over the next five years.

16

Source: SMM

0

5

10

15

20

0

5

10

15

20

2005 2010 2015E 2020E

Base stationsBase station ownershipLead-acid battery demand

Lead-acid（Battery（End（Use Exports（

Lead-acid（Battery（Exports（2005-2020E1

Lead-acid（Battery（Exports

15

20

25

30Unit: piece


overseas（demand tariff（ exchange（rate（ Shanghai/LME（lead（price（ratio

contributory（factor2

5

10

2005 2010 2015E 2020E

Lead-acid battery exports Ignition lead-acid battery Other types of lead-acid battery

� China will put lead-acid battery consumption tax into effect in 2016, which will push up costs for Chinese lead-acid battery producers. This move will also weaken competitiveness of Chinese lead-acid battery in overseas market, thus affecting battery export growth.

17

Source: SMM

New（Drivers（of（Lead-acid（Battery（Consumption

E-Tricycle（and（E-Quadricycle（Ownership

Market（Conditions（

� Shandong is one of the major producing

regions of e-tricycles. E-tricycles are quite

popular in second-tier and third-tier cities.

However, some local governments restrict use

2E-Tricycle（and（E-Quadricycle（Ownership1

Unit: 10,000 e-tricycles and e-quadricycles

Unit: 10,000 kvah

20

25

30

35

20

25

30

35


However, some local governments restrict use

of e-tricycles in recent years.

� E-quadricycle was new in China until two

years ago. E-quadricycle battery is mainly sold

to e-quadricycle manufacturers at present.

Tianneng Group is the major producer of e-

quadricycle battery.

18

Source: SMM

0

5

10

15

0

5

10

15

2005 2010 2015E 2020E

E-tricycle outputE-quadricycle outputOwnershipLead-acid battery demand

Li（Battery（Substitution（for（Traditional（Lead-acid（Battery

Li（Battery（Substitution（for（Traditional（Lead-acid（Battery

Li（Battery（（Market（

� Advantages of Li battery: 1. Lightness; 2. More

energy efficient and environmentally friendly than

lead-acid battery; 3. Life of Li battery is typically

twice longer than that of lead-acid battery.

2Production（of（Li（Battery（Vs（Lead-acid（Battery（1

40%

50%

60%

20

25

30

Unit: 10,000 pieces


Source: SMM

� E-bike is the first example of Li battery

substitution for lead-acid battery. Li battery is

increasingly chipping away at the market share of

automotive lead-acid battery as new energy

vehicle market is expanding rapidly during 2014-

2015. Currently, substitution rate of Li battery for

lead-acid battery is around 10% in China. China’s

Li battery production is expected to grow at about

10% pace each year.

19

0%

10%

20%

30%

0

5

10

15

2005 2010 2015E 2020E

Li battery output Traditional lead-acid battery outputGrowth of Li batteryGrowth of traditional lead-acid battery

Traditional（Lead-acid（Battery（Producers（Set（Foot（into（New（Types（of（Batteries（

Start-Stop（Battery


10,000（kvah


Fengfan（Co.

Capacity（and（Expansion（Plans（at（Major（Start-Stop（Battery（Producers2

Development（Trend（of（Start-stop（Battery（in（Coming（Five（Years（1

800

1000

1200

1400

Unit: 10,000 kvah


Fengfan（Co.

Camel（Group

Johnson（Controls

A

B

C

Major Chinese battery manufacturers are ramping up investment and production of start-stop batteries, which enjoy bright market prospects because of its energy efficiency and environmentally friendliness. Market share of start-stop batteries is less than 10% in China, well below 40% in Europe and the US. However, its market share is expected to rise to 40-50% in coming five years.

20Source: SMM

0

200

400

600

800

2010 2015E 2020E

Traditional lead-acid battery

Start-stop battery

Traditional（Lead-acid（Battery（Producers（Set（Foot（into（New（Types（of（Batteries（

Lead-carbon（battery:（motive（battery（suitable（for（use（in（new（energy（vehicles

Indicator（ Lead-carbon（battery Ordinary（lead-acid（battery

specific（power 240W/kg 180W/kg

IEC61427 and（GB/T22473-2008cycleendurance（life >3times

15 times remaining（capacity（93% 4 times

80%DOD cycle（life（ 1600 times remaining（capacity（93% 400 times

30%DODcycle life（ 3500 times remaining（capacity（93% 1000 times（

GB/T22473-2008（ability（to（receive（

Company（

Existing（Capacity（

Expansion（

Plans（

Shandong（Sacred（

Sun（Power（

Sources（Co.

NaradaPower（Source（


GB/T22473-2008（ability（to（receive（charge >2.0 2.8 2

GB/T22473-2008low-temperature performance discharge（capacity>80%（when（temperature（is-

10

90% 80%

Fast（charge（ability 1h 12h

SBA-S0101 hybrid（motive（battery（cycle（life >150000 times（ 30000 times（

design（life hybrid（motive（type

Source（Co.

Guangdong（

DynavoltPower（

Technology（Co.

A

B

C

21

� Lead-carbon battery represents technical innovation of lead-acid battery and has many advantages: 1. Charge eight times faster than lead-acid battery; 2. Discharge power is three times higher than lead-acid battery; 3. Cycle life is as long as 2,000 times, which is six times longer than lead-acid battery; 4. High price-performance ratio. Although lead-carbon battery is more expensive than lead-acid battery, much longer cycle life allows it to have higher price-performance ratio; 5. Safe and stable. Lead-carbon battery could be widely used in energy-saving field.

Source: SMM

Raw（Material（Use（in（Lead-acid（Battery:（Substitution（of（Secondary（Lead（for（Primary（Lead

Secondary（Lead（Use（by（Lead-acid（Battery（Producers

Type Company

Ratio of Secondary Lead and Primary Lead Use

2010 2015E 2020E

secondary lead

primary lead

secondary lead

primary lead

secondary lead

primary lead

motive battery

TiannengGroup

ChilweeGroup


ignition battery

FengfanCo.

Camel Group

backup battery

NaradaPower

Source Co.

Shandong Sacred

Sun Power Sources

Co.

22Source: SMM

Lead-acid（Battery（Market（Trend（（

How is lead-acid battery market reshaped by growing trend of enclosed battery formation process and lead-calcium alloy battery

upgrade into rare earth alloy battery?

Lead-acid battery cost structure and development trend

© SMM. All rights reserved. 23

trend

Booming new energy vehicle market is boosting demand for Li battery. Will lead-acid battery be fully replaced by Li battery? Will

lead-carbon battery be the game changer?

Technical progress in secondary lead smelting process results in higher ratio of secondary lead use by lead-acid battery

manufacturers. How should companies establish green value chain?

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Documents

China Lead-Acid Battery Market StudyChina will put lead-acid battery consumption tax into effect in 2016, which will push up costs for Chinese lead-acid battery producers. This move