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When paying attention to energy storage, how can we not pay attention to CRRC Zhuzhou Institute, the leader in the energy storage industry?

Although CRRC Zhuzhou Institute is already the leader in China's energy storage industry, the energy storage business is not very important to CRRC Zhuzhou Institute.

For example, on the official website of CRRC Zhuzhou Research Institute, energy storage is not even considered an independent business unit. Even in the new energy product unit, CRRC Zhuzhou Research Institute listed four types of new energy products, but energy storage was not even eligible to appear.

CRRC Zhuzhou Institute, a central enterprise, has taken the entire energy storage industry by storm with just a little effort. Therefore, today we need to interpret the energy storage business of CRRC Zhuzhou Institute - how did this "king of the domestic energy storage market" do it?

01The proud son of heaven became the king of energy storage rolls

CRRC Zhuzhou Institute's business map; from the company's official website

Energy storage is very popular, and CRRC Zhuzhou Institute’s title of “King of Popularity” is well deserved.

In the first half of this year, CRRC Zhuzhou has received a lot of orders from major domestic enterprises. As long as CRRC Zhuzhou participates in a project, other enterprises will know that even if they win the project after a fierce competition, they will not make any money.

Taking July this year as an example, Polaris Energy Storage Network tracked 143 energy storage bidding projects with a total scale of 7.8GW/38GWh, of which 51 energy storage systems had a bid price of less than 0.6 yuan/Wh. The company with the most winning bids was still CRRC Zhuzhou Institute, which won 10 energy storage system procurement bids.

Let’s first understand CRRC Zhuzhou Institute, a real energy storage white horse, from the upper-level business structure.

(1) CRRC Zhuzhou Institute is a state-owned enterprise with a history of more than 60 years. Its full name is “CRRC Zhuzhou Electric Locomotive Research Institute Co., Ltd.”. It is a wholly-owned subsidiary of the central enterprise CRRC Corporation Limited and a first-level wholly-owned subsidiary of CRRC Corporation Limited.

(2) CRRC Zhuzhou Institute has a wide range of businesses and numerous subsidiaries:

(3) In terms of scale, CRRC Zhuzhou is only at an upper-middle level. According to the announcement of CRRC Corporation Limited: CRRC Zhuzhou achieved operating income of 52.309 billion yuan in 2023.

From CRRC Corporation Limited's 2023 Annual Report; Unit: Thousand Yuan Currency: RMB

(4) Energy storage business is a small and new business among all the businesses of CRRC Zhuzhou Institute, and it has not even achieved independent corporate operation yet.

Public information shows that on February 15, 2022, the Comprehensive Energy Business Department of CRRC Zhuzhou Institute was officially unveiled, and the industrial and commercial registration was completed on June 30 of the same year; on August 5 of this year, the legal representative of CRRC Zhuzhou Institute was changed from Xu Shaolong to Tang Yuanyuan.

Xu Shaolong is now the general manager of Times Electric. His public resume shows:

From January 2022 to June 2022, he served as Assistant General Manager of CRRC Zhuzhou Institute and General Manager of the Industrial Development Division; from July 2022 to February 2023, he served as Assistant General Manager of CRRC Zhuzhou Institute and General Manager of the Integrated Energy Division; from March 2023 to June 2024, he served as Deputy General Manager of CRRC Zhuzhou Institute and General Manager of the Integrated Energy Division; from September 2023 to June 2024, he also served as Secretary of the Board of Directors of CRRC Zhuzhou Institute.

It can also be seen from Xu Shaolong's resume that the general manager of the Integrated Energy Business Department of CRRC Zhuzhou Institute has always been concurrently served by senior executives of Zhuzhou Institute, which is enough to show the importance that Zhuzhou Institute attaches to this business.

Tang Yuanyuan is the supervisor of CRRC Zhuzhou Institute. When Xu Shaolong was the general manager of the Integrated Energy Business Department of CRRC Zhuzhou Institute, he served as the deputy general manager.

Tianyan Check shows that CRRC Zhuzhou Institute’s Integrated Energy Business Department is currently a small and micro enterprise, with 230 employees at the end of 2023.

Judging from the attributes of a "small and micro enterprise", it is estimated that CRRC Zhuzhou Institute has not included all of its energy business (especially production and manufacturing) and has not yet achieved independent accounting for its energy business.

The new energy storage industry is one of the eight major industrial sectors of CRRC Zhuzhou Institute, which includes the new energy equipment industry sector, new energy wind power industry, and new energy photovoltaic industry. The new energy storage industry includes energy storage system integration, energy storage EPC and other businesses.

Therefore, we can roughly draw the following hierarchical relationship from top to bottom: CRRC Corporation Limited - CRRC Zhuzhou Institute - new energy equipment industry sector - new energy storage industry sector.

From the official website of CRRC Zhuzhou Institute

With such strength and background, CRRC Zhuzhou's energy storage business naturally has the advantages of timing, location and people, and its achievements are obvious to all.

The Zhongguancun Energy Storage Alliance (CNESA) released the 2023 shipment rankings of Chinese energy storage (battery) system integrators. The top three Chinese companies in terms of global energy storage system shipments are: Sungrow Power Supply, CRRC Zhuzhou Research Institute, and Hibostron; the top three companies in the domestic market are: CRRC Zhuzhou Research Institute, Hibostron, and Xinyuan Intelligent Storage.

In the first half of 2024, CRRC Zhuzhou Institute ranked first in the number of domestic energy storage bids.

02Repeatedly winning bids at low prices, shocking the market!

In parallel with CRRC Zhuzhou's expansion into the energy storage market, there is news that it has repeatedly set new low prices:

In December 2023, CRRC Zhuzhou successfully won the bid for Guangdong Energy Group's energy storage system project at a low price of 0.638 yuan/Wh, setting a new record for the lowest price in the industry.

On July 5 this year, CRRC Zhuzhou Institute was pre-awarded the bid for the equipment procurement of the 300MW/1200MWh "wind, solar, thermal and hydrogen storage integrated" energy storage power station project in Ulanqab, Inner Mongolia, Beijing, with a bid price of 0.495 yuan/Wh.

On July 17 this year, CRRC Zhuzhou won the bid for Section II (DC side) of the 135MW/540MWh electrochemical energy storage project of the Baotou Aluminum Industrial Park green power supply project at a price of 0.435 yuan/Wh.

The offer price of 0.435 yuan/Wh shocked the entire industry. Can CRRC Zhuzhou make money at such a low price? At least, many energy storage peers found it difficult to understand.

The marketing manager of a leading energy storage company told Gantanhao that it is difficult to judge the strategic intention of CRRC Zhuzhou Institute. It may be that state-owned enterprises have a higher tolerance for gross profit margins, or it may be due to the strategic need to exchange resources for market share.

The cost of lithium battery energy storage system has always been clear. It is mainly composed of battery packs, battery management system (BMS), energy management system (EMS), charging management system, power distribution system and auxiliary equipment.

The battery cell accounts for the largest proportion of the cost. On July 26, the prices of square power cells (FeLi), square power cells (ternary), and square energy storage cells (FeLi) were 0.36 yuan/Wh, 0.45 yuan/Wh, and 0.34 yuan/Wh, respectively.

Guolian Securities Report on June 18, 2024

So, based on current price information and price trends, is CRRC Zhuzhou Institute's low price a loss-making move to gain publicity, or a rational move guided by business strategy? Is it willing to take a loss in order to occupy the market first, gain market opportunities, and accelerate the reshuffle of the industry?

From Soochow Securities' Energy Storage 2024 Mid-Year Strategy Report

As mentioned above, the energy storage business of CRRC Zhuzhou Institute has not yet achieved independent accounting, so it is difficult for us to know the operating results and quality of CRRC Zhuzhou Institute's energy storage business. It is estimated that the energy storage business should also have a market-based assessment mechanism.

Public information shows that in addition to the above-mentioned comprehensive energy business unit, CRRC Zhuzhou Institute also has multiple production and manufacturing entities.

There are two that are mentioned most frequently:

One is the new energy storage base of Xilin Gol League of CRRC Zhuzhou Electric Locomotive Research Institute Co., Ltd., which was unveiled on July 23 this year, and the first energy storage DC cabin rolled off the production line at the same time.

The base's integrated line has a single warehouse capacity of 5.X MWh and an average monthly shipment of 60 units, covering Hebei, Inner Mongolia, Shanxi and other places. It can meet the energy storage product needs of customers within 1,000km of Xilinguole League. When fully operational, the annual output value can reach 1 billion yuan.

The other is Yibin CRRC Times New Energy Co., Ltd.

It was established in 2023 with a registered capital of RMB 113 million. He Gengliang, general manager of Yibin CRRC Times New Energy Co., Ltd., said: "The 2GWh energy storage pack and integrated cabin production line planned by CRRC Energy Storage Manufacturing Base will be fully put into production at the end of this month, and the 6GWh energy storage pack and energy storage battery cabin will be fully put into production in the third quarter of this year."

03What does land grabbing depend on?

CRRC Zhuzhou Institute has not officially explained to the market the rationality of its frequent low-price bids, but scattered information still leaks out.

(1) On August 2, this year, the Zhongguancun Energy Storage Industry Technology Alliance published an article reporting on the "Together for Energy Storage, Together for Success" Industrial and Commercial Energy Storage Ecological Partner Conference of CRRC Zhuzhou Institute. The article introduced CRRC Zhuzhou Institute's strategic layout for entering the industrial and commercial energy storage market, and also explained CRRC Zhuzhou Institute's low price:

“According to feedback from the conference participants, the reason why CRRC Zhuzhou Institute can offer lower prices isThis is partly due to its strong cost control capabilities and technological advantages.”

"CRRC Zhuzhou Institute has accumulated more than 60 years of power conversion technology and more than 20 years of energy storage technology. Whether it is in the power supply side dominated by new energy, including wind power generation, photovoltaic power generation, water conservancy and hydropower, energy storage systems and other fields, or in the power grid side, including power quality, power transmission and distribution, power electronic devices, etc., as well as in the user side and transportation field, CRRC Zhuzhou Institute can provide complete core equipment and solutions.

The diversified development of the industry has driven the development of the energy storage field, which is an important cornerstone for building new power systems. CRRC Zhuzhou Institute has currently established the production capacity of the entire industry chain from battery PACK, battery cluster to BMS, PCS, EMS, energy storage system, etc. At the same time, its self-developed core components can help improve the overall system efficiency and reduce product costs. "

This article does not clearly state the specific names of the "conference participants", but who has the qualifications and identity to explain the low-price behavior of CRRC Zhuzhou Institute?

(2) In addition, there is an article citing an unnamed person. A relevant person in charge of CRRC Zhuzhou Institute once said: “Competition in the energy storage industry is becoming increasingly fierce.Industry-leading supply chain systemIt is a key strategic control point for CRRC Zhuzhou Institute.”

At present, CRRC Zhuzhou Institute has established the production capacity of the entire industry chain from battery PACK, battery cluster to BMS, PCS, EMS, energy storage system, etc. At the same time, its self-developed core components including IGBT can help improve the overall system efficiency and reduce product costs. These seem to also show that Zhuzhou Institute has strong strength in reducing costs.

Based on the above articles, CRRC Zhuzhou Institute’s low-price behavior can be attributed to: management, technology, and supply chain.

However, Gantanhao believes that the strong financial strength, low capital cost, central enterprise identity and central enterprise credit of central enterprises are also unique and very important hard power of CRRC Zhuzhou.

CRRC Zhuzhou Institute prepared to enter industrial and commercial energy storage on a large scale in July this year. Before that, its business was basically large-scale energy storage. The downstream customers of large-scale energy storage power generation are the five major and six small central state-owned enterprises.

According to the announcement of CRRC

According to the information disclosure rules of the Hong Kong stock market, listed companies must disclose major contracts regularly. Although the media reported that CRRC Zhuzhou received a 4 billion order in 2022, perhaps the volume was too small and did not meet the disclosure requirements and did not constitute a major contract order, so there has been no information announcement in this regard.

It was not until December last year that CRRC listed CRRC Zhuzhou's energy storage equipment contract separately when disclosing its subsidiaries' major contracts.

04 When will we explore the overseas market?

The energy storage market is a large, open and transparent market. CRRC Zhuzhou, with its central enterprise background, has all the strengths and advantages, and the strengths of excellent private and foreign enterprises should not be underestimated.

InfoLink Global Lithium Battery Supply Chain Database points out that the global energy storage system shipments in the first half of 2024 will be about 90 GWh. In the first half of the year, the top five system integrators on the AC side were Tesla, Sungrow, CRRC Zhuzhou Institute, Fluence and Envision Energy Storage. Compared with CRRC Zhuzhou Institute, which mainly focuses on the domestic market, Sungrow and Envision Energy Storage are stronger in the overseas market.

Recently, these energy storage giants have frequently won large energy storage orders in the international market:

On July 16, Sungrow officially announced that it had successfully signed a contract with Saudi Arabia's ALGIHAZ for the world's largest energy storage project (with a capacity of up to 7.8GWh), which will begin delivery in 2024 and will be connected to the grid at full capacity in 2025.

On July 18, the US company Intersect Power announced that by 2030, Tesla will provide it with 15.3 GWh of battery energy storage systems, once again breaking the world record.

A research report by Soochow Securities on August 4, 2024 pointed out: There is fierce price competition in the domestic market. As of July 24, the average bidding price of domestic energy storage systems was only 0.64 yuan/wh, and the gross profit margin of energy storage systems in the domestic market was only about 10%. Overseas prices are higher than domestic prices and more profitable. The gross profit margin in the Middle East market can reach 20-30%, and the gross profit margin in Europe and the United States can reach 30%+.

From Soochow Securities' Energy Storage 2024 Mid-Year Strategy Report

In addition to Sungrow and Envision Energy Storage, which have a relatively high share, the companies that can now obtain energy storage orders overseas include some photovoltaic companies such as Canadian Solar.

At the mid-term photovoltaic conference held in Wenzhou in July this year, Canadian Solar's secretary Xu Xiaoming also said that he could not understand the domestic energy storage system quotations. Canadian Solar's energy storage costs are higher than the current quotations in the energy storage market.

What are the differences between the domestic and overseas energy storage markets? On August 2, Canadian Solar announced an investor communication minutes, which mentioned that "the company's large-scale energy storage sales are currently mainly in developed countries such as North America, Europe, and Australia. The power market mechanisms in these countries can effectively guide the investment costs of energy storage power stations, form a healthy business model for energy storage power station operations, and ensure the investment returns of the projects. Therefore, when selecting suppliers, price is not the only consideration. It is also necessary to consider whether the power station can ensure long-term safe and efficient operation."

Although the energy storage business helped Canadian Solar achieve profitability in the first half of 2024 amid severe internal competition in the photovoltaic industry, another reality that has to be accepted is that Tesla, with a better brand image, has a higher premium in the energy storage market and a higher gross profit margin.

As a star enterprise and a leader in domestic energy storage, does CRRC Zhuzhou Institute have the strength and courage to participate in the competition in the overseas energy storage market and compete with Tesla and Sungrow?