Tesla to join hands with BYD this time? | Jianzhi Research

According to the latest news, BYD's subsidiary, Fudi Battery, reached a supply agreement with Tesla for the Shanghai energy storage factory in March this year, and will supply energy storage battery cells to Tesla in the first quarter of next year.

This means that at a time when the growth of the automotive business is weak, Tesla may start to vigorously promote the development of the energy storage business in the future, and increase the number of battery suppliers in advance to ensure the stability and diversification of the battery supply chain. At the same time, BYD is also expected to benefit fully from this cooperation, increase market share, and further expand its influence in the overseas energy storage field.

If the cooperation is successfully implemented, it will achieve a win-win situation under the strong alliance.

1. New energy vehicles slow down, but energy storage remains active

Compared to the obvious slowdown in the growth rate of the new energy vehicle industry, the energy storage industry is still in rapid development.

In the first quarter of this year, the total scale of domestic energy storage systems and EPC bidding reached 10GWh and 24GWh, with a year-on-year growth rate of 170% and 130% respectively.

Benefiting from the latest domestic electricity price adjustment policy and the continuous decline in costs this year, the demand for energy storage will continue to grow.

Since the beginning of this year, several provinces and cities in China, such as Zhejiang, Henan, and Jiangsu, have issued time-of-use electricity price adjustment policies, widening the peak-valley electricity price difference (in June this year, the national peak-valley price difference has exceeded 0.7 yuan/kWh), which will further stimulate enthusiasm for investment in the energy storage sector.

Taking the example of Zhejiang Province's time-of-use electricity price adjustment policy, the peak-valley electricity price difference has increased from 0.926 yuan/kWh to 0.943 yuan/kWh (calculated based on the average level for the whole year of 2023), driving the full investment return rate of user-side energy storage projects from 20.52% to 21.29%.

In addition, the cost of energy storage is also following the decline in raw material prices.

The average price of energy storage battery cells has dropped to a historic low of 0.33 yuan/Wh, and the weighted average bidding prices of energy storage systems and EPC have also fallen to historical lows, with the latest bidding prices being 0.69 yuan/Wh and 1.16 yuan/Wh respectively.

2. Win-win for BYD and Tesla

BYD and Tesla are expected to achieve their first cooperation in the field of battery cells.

(1) BYD

From BYD's perspective, in addition to the new energy vehicle field, the company also has a significant impact in the energy storage field. In 2023, BYD's energy storage system shipments reached as high as 28.4GWh, a year-on-year increase of 136%, far exceeding the growth rate of installed power batteries at 52.6%. With a market share of 13%, it ranks second globally, with shipments of 10GWh in China and 18.4GWh overseas (energy storage business covering 107 countries and regions).

Huawei Finance Research believes that the advantage of BYD's energy storage battery products comes from its cost advantage after independent research and development at scale As BYD Chairman Wang Chuanfu said, "In the future, car battery capacity and energy storage battery capacity need to be highly integrated." BYD's energy storage battery products, from basic battery cells to BMS systems, are all independently developed. Star products like blade batteries and sodium-ion batteries can also be applied to energy storage battery products simultaneously. Therefore, compared to single energy system integrators, BYD has a higher cost advantage.

At the same time, BYD's energy storage battery products cover power side, grid side, and user side comprehensively, and can launch targeted solutions for various scenarios such as industrial parks, coastal areas, and cities.

This has enabled BYD to frequently win energy storage orders at home and abroad this year, including signing an agreement with Spanish renewable energy developer Grenergy for a 1.1GWh energy storage system order in January, winning the bid for China Datang Corporation's 1GWh 0.5C and 1GWh 0.25C energy storage system projects in February, and winning the bid for LinYuan Power (Nanjing) Co., Ltd.'s 1.4GWh energy storage equipment DC cabin frame project in March.

If BYD wins the Tesla energy storage order this time, it not only represents further recognition of BYD's product quality by overseas giants, but also the supply of over 8GWh of energy storage batteries is a large order for BYD, which will help increase market share.

(2) Tesla

From Tesla's perspective, Tesla's core business of selling cars has performed poorly in recent quarters. In the first quarter of this year, Tesla suffered a collapse in sales volume, as well as a triple decline in revenue, net profit, and gross margin.

However, in the first quarter of this year, Tesla's energy business revenue increased by 7% year-on-year, and gross profit increased by 140%, reaching a historical high and becoming the only growth point among all of Tesla's businesses.

With the subsequent landing of new production lines at Tesla's Shanghai energy storage factory and California Lathrop factory, the demand for energy storage batteries is gradually expanding.

Specifically, Tesla's Shanghai energy storage factory is Tesla's first energy storage super factory project outside the United States, mainly supplying large-scale energy storage systems Megapack for industrial and commercial use (Powerwall for homes is not involved for now).

The overall energy storage capacity of the Shanghai energy storage super factory reaches around 40GWh (currently, Tesla's Lathrop energy storage factory in California has a capacity of only 24GWh), and it is expected to officially start production in the first quarter of 2025, producing over 10,000 sets of Megapack energy storage systems annually in the future With the increase in energy storage capacity, Tesla will definitely increase its battery suppliers, which has been validated in the selection of the new energy vehicle supply chain. Therefore, in addition to CATL, it is also a reasonable option for Tesla to allocate some orders to BYD.

In today's new energy market, the effect of going it alone is far less effective than strong alliances, and cooperation across various industries is believed to continue in the future