On the evening of May 27, Ren Zeping, economist and founder of Zeping Macro, and Zhang Zhen, chief hydrogen expert and founder of Zhenyi Hydrogen Energy, launched a wonderful conversation around the new energy industry. This conversation was broadcast exclusively on the Baidu app.
How did China's auto industry finish overtaking on the new track? Is there still a future for new energy vehicles? Do we really have excess capacity? What may be the major trends of new energy in the future?
See the below for the dialogue text
Ren Zeping: Today, I will talk about some topics that you are concerned about, especially in the field of new energy. New energy is one of the most promising and fastest growing areas of China's economy. New three samples: new energy vehicles, lithium electricity, photovoltaic power. Now China's new energy in the rapid rise, a large number of sea, become the main force, the global new energy vehicles China has accounted for 60%, photovoltaic accounted for 90%. It can be seen that China in the field of new energy can be said to be a comprehensive outbreak.
President Zhang, now the installed capacity of scenery continues to rise, and the installed capacity of green electricity is rising sharply, but now the power grid is under pressure. a lot of green electricity can not be connected to the network, which is unstable, leading to a lot of waste. How can we increase the consumption of green electricity in the future?
Zhang Zhen: OK, let's analyze it layer by layer. Recently, there are also frequent signals. On May 23, Jinan executives and many entrepreneurs held a symposium on deepening the reform of electric power system, emphasizing the importance of electric power market reform. On April 1st this year, the National Development and Reform Commission issued the "Regulatory Measures for the Full Guaranteed Acquisition of Renewable Energy Electricity". Policy is a very big watershed point for the industry. In the past, our new energy power is the priority to guarantee the consumption, as much as the grid. But the policy means that only part of the electricity is within the coverage. The electricity outside the guarantee scope is traded to enter the market and follow the market-based pricing. Breaking the mechanism of the past, it can be understood as no longer guaranteed quantity and no longer insured price. The new electricity reform plan that we are very concerned about this year is also about to be released. All the signals all point to a common direction. —— The power market should gradually step forward to the market.
Ren Zeping: Was there a subsidy for the priority of green electricity Internet access before?
Zhang Zhen: It used to exist, but after 2020. There is a 95% red line, but the red line will also be hit later. Some are covered, but some will go into the market to trade. With the rapid growth of the installed capacity, the installed capacity in 2023 exceeded 300 million kilowatts, and has reached 1.05 billion kilowatts by last year, and is likely to exceed 1.3 billion kilowatts this year. When we set the 2030 and 2060 targets in 2020, the cumulative target had exceeded 1.2 billion kilowatts by 2030, which is equivalent to achieving the target set six years ahead of schedule by the end of this year. At this rate, it will reach 3 billion kilowatts by 2030, three times the current wind installed capacity. Our non-fossil energy sources need not only to meet the incremental power demand, but also to replace the stock, which brings great challenges to the security and economy of the entire grid, including the increasing backup cost of the whole system.
Electricity has a characteristic of "immediately issued immediately to use", the electricity generated instantly to be used up. However, "generation and use" is based on the relatively planned before, but now the scenery is not so strong planning, there are a lot of fluctuations and uncertainty, leading to the increasing pressure of the grid balance.
Renewable energy is difficult in the northern and western regions, and the utilization rate is relatively low. However, power shortage and power shortage still occur during the peak period in the eastern and coastal areas. We from the traditional planning mode to the market model, multi-level, wide coverage transition and reform, requirements for technology innovation, price mechanism, management mode to upgrade and reform, the future to let the market play a decisive role in the allocation of resources, break the geographical restrictions, realize the optimal allocation of power resources across the country, let the price can really to reflect the relationship between supply and demand and the change of cost. This is a big industry background. However, behind any challenge and problem also means the opportunity.
Ren Zeping: The reason why China should develop green electricity is because of its two-carbon commitment and its lack of oil and gas. It is also based on energy security considerations. We import 70% of our oil. In today's geopolitical turmoil and anti-globalization, China faces huge challenges in its energy security. Once our traditional energy supply is broken or uncertain, it will bring great challenges to the whole transportation and industry. Not only because of energy security, but also to seize the opportunity of the third energy revolution. The whole new energy track in China has seen explosive growth.
After a large number of green electricity comes, it also faces the problem of consumption and use. Some time ago we went to Longji research, they mentioned the distributed, source network load storage, local consumption. So distributed, energy storage in the future are incremental markets. Can you tell us about the future of energy storage?
Zhang Zhen: Good, energy storage we mainly look at the power side and the user side. Our fastest growing one in recent years is the new energy storage mainly based on electrochemistry. Objectively speaking, the utilization rate of energy storage on the power side is not high, and the average equivalent utilization coefficient of energy storage on the power side is less than 10%. The frequency of power grid mobilization is very low, resulting in the failure to maximize the value in the new power system, resulting in a certain waste of resources and asset investment. Now the industry is also focusing on transforming the unstable power into stable chemical energy, namely hydrogen energy, and the future development direction of the power side is long-term energy storage. On the user side, electrochemical energy storage is mainly an important direction, because of higher flexibility. With more and more renewable energy connected to the grid, the peak-valley price difference will gradually increase, because the main profit model of energy storage is still the peak-valley price difference. It must be an optimized configuration in the future that combines the needs of the scenario.
Ren Zeping: In the past 20 years, although the independent brands have always been catching up and their technical capabilities have been constantly improving, their brand influence is far less than today in the new energy era. Originally in the era of fuel vehicles, a large number of Chinese independent brands are concentrated in the middle and low end, and the high-end is occupied by foreign brands, but after entering the track era of new energy vehicles, China's BYD and others have risen. So how did China's auto industry finish overtaking on the new track?
Zhang Zhen: In the field of passenger cars, our country mainly promotes the pure electric route. Hydrogen fuel cell vehicles are currently mainly used in commercial vehicles. In 2023, the market share of our new energy vehicle brands exceeded 50%, and we predict that it should exceed 60% by 2025. However, now the influence of our brand in the international arena is not strong enough, and we have not earned the premium of the brand. Although the production and sales volume are good, the profitability is still lacking, which is a direction for us to strive for.
Ren Zeping: Now, a large number of Chinese new energy vehicle enterprises are going overseas. Last year, China has surpassed Japan to become the largest country in automobile export. We still need to see the future development prospects. China's large-scale industrialization and industrialization capacity is very strong, and it has a market of 1.4 billion people, which can quickly reduce the cost of an industry. What are the main reasons for the rise of China's new energy vehicles?
Zhang Zhen: I think, first of all, it is the strong support of the policy. More than a decade ago, the important strategic direction of new energy vehicles was determined. There are several reasons behind the strong national policy support. First, it is based on energy security considerations. Just now, Teacher Ren also said that 72% of China's oil is imported, and there is a risk of oil supply interruption. So we hope to develop our own new energy vehicles, combined with electrification, to reduce the dependence on fuel. Second, although the two goals of 2030 and 2060 had not been put forward at that time, climate change was always a challenge for human beings. From the perspective of carbon reduction, low carbon reduction should be adopted. The third is the corner overtaking just mentioned. Although our country has about 30 million production and sales a year, it is big but not strong. In the past, we opened the market and introduced the international first-class brands, but we did not master the core technology, and the market contributed to it, but we did not get the real technology. If we want to surpass others, it is actually very difficult. But if we change a track, it is possible to lead on the electric road. Based on three aspects, energy security, carbon reduction, the automobile industry really bigger and stronger considerations, we unswervingly choose the new energy vehicle industry. Our achievements are due to the strong support of national policies. Second, we do have some entrepreneurs and new forces in car manufacturing. We regard this as a very important direction of struggle and have invested great efforts to make it an industry with great advantages today.
Ren Zeping: Yes, I think China's new car companies and entrepreneurs of new energy are very great. They have really realized the curve overtaking, and now they have become the first echelon. In some directions representing the future, Tesla will also launch driverless cars on August 8. Some time ago, the central government also proposed a new energy system, one of which is very important is hydrogen energy. I think hydrogen energy may be in the "do not understand" stage, there are a lot of controversy, safety, application scenarios and so on. President Zhang, can you tell us why hydrogen energy can represent the future? And why is it an important part of the emerging energy system?
Zhang Zhen: There are two important events on hydrogen energy this year. One is the government work report at the beginning of this year, which mentioned the need to accelerate the development of the hydrogen energy industry. This is a signal that the word "accelerated" shows that the industry is close to the commercialization, and on the eve of the commercialization, it is closer to the scale of the application. The other is the energy Act of the People's Republic of China this year, where hydrogen energy actually making it a part of the modern energy system. The reason why we think hydrogen is important and necessary is because our entire modern energy system needs it. We just mentioned how can the supply side increase the share of renewable electricity? For example, upstream renewable power local consumption, long-term energy storage and other issues. Now many scenic bases are built next to thermal power plants, because it should be tied with thermal power to the Internet, stable thermal power can smooth the instability of the scenery.
Ren Zeping: In the future, China's energy system should be based on green electricity, supplemented by thermal power?
Zhang Zhen: Yes, in the future, thermal power will become a regulatory power supply and become energy storage. Based on this phenomenon, what is the future of ecology? Green electricity is not the part of the network, you can produce hydrogen, transmitted to the nearby thermal power plant. We are now burning coal, burning gas, and we can burn hydrogen in the future. In my opinion, the importance of hydrogen mainly depends on both sides. From the power side, the so-called hydrogen energy storage in the future is a broad concept, which is to turn thermal power generation into a flexible power supply, more like an energy storage, to adjust the grid, reduce carbon emissions, and absorb more renewable power. From the demand side, it can be combined with the chemical industry to make synthetic ammonia and synthetic methanol, including petroleum refining, coal chemical industry, etc. Hydrogen energy has the properties of fuel and raw material, so its downstream can be combined with chemical industry, transportation, metallurgy and steelmaking, especially in high temperature areas. In the end, our energy system needs it.
Ren Zeping: According to what Zhang Yuan just said, according to the current speed of developing scenery installed capacity, the scenery installed capacity will be three times that of China. What if the large power grid can not absorb so much? One is distributed, local consumption. The other is to do hydrogen energy. Why not convert it into lithium energy storage? Can President Zhang explain it at once.
Zhang Zhen: In the past few years, we have equipped a lot of electrochemical energy storage mainly lithium battery on the power side, but the utilization rate is too low, and the return on investment of energy storage assets is very low. Although hydrogen also has losses, it is still valuable if commercial hydrogen and hydrogen fuel, combined with chemical industry, can achieve its economic benefits. And there is a problem, short-term energy storage, can only store two to four hours of discharge. Assuming that we have some areas only photovoltaic, for 10 hours at night, it is difficult to support. Therefore, we need long-term energy storage on the power side, and on the user side, short-term energy storage, electrochemical energy storage and lithium energy storage have a large application space.
Ren Zeping: Just now, everyone wanted you to talk to us about Chinese cars. They said that Apple, China's new energy vehicles, directly gave up building cars, and Chinese car companies are expected to overwhelm most of the other competitors. For present, half of the world's new energy vehicles are produced in China, and China is exporting large quantities. How do you see the future of new energy vehicles?
Zhang Zhen: Let's start with the big direction. What the first half is electrification, and the breakthrough is the whole three-power system, including infrastructure, charging network construction, including some new innovative models, some operating vehicle business, and so on. The whole process is from the key components and technologies of the car itself to the construction of the whole new energy infrastructure system. But the second half is more intelligent, which is the unmanned driving you mentioned, which is equivalent to subverting the future way of life and production. The future electric car itself is also a mobile energy storage unit, called the car network interaction. The car of the future is not only an energy, but also a two-way interaction of information. So the car is not just a load to consume electricity. It's also a power source that reverses its power to the grid. There are a lot of supporting systems behind this that need to be improved. For example, the upgrading of the entire technology system of distribution network and V2G, including the smart micro grid and virtual power plants you mentioned just now, also has the construction of some supporting systems. However, if the mobile energy storage resources of electric vehicles can be fully mobilized and utilized, it is equivalent to integrating these scattered and flexible composite resources more efficiently, which can significantly reduce the investment of energy storage assets. At the same time, the car becomes a production tool. There are indeed many challenges in the actual process. For example, the capacity of many distribution networks is not enough. The construction of the distribution network, the whole standard system, including the price mechanism, now V2G reverse power supply has no clear price. But these may be gradually improved in the process of the whole electricity market to marketization.
Ren Zeping: The rise of electric cars in China has been very fast in the past two years. But don't forget that electric cars have also experienced the winter. Tesla began running electric cars in early 2000.
Zhang Zhen: It has a rule. The market penetration rate has increased after 10%. Before that, the growth was very slow.
Ren Zeping: I watched a big speech given by BYD Wang Chuanfu some time ago, about the delivery of his 5 million cars. Wang was in tears at the scene. In the most difficult time of 2019, they are also worried about not welcoming the spring. As a result, the industry soon exploded. Minfulness, adhere to do the long-term right thing, ushered in the outbreak and rise of China's electric vehicles. One of the topics we are talking about today is "entering the knockout round". My impression is originally more than 100 new power car companies. In the end, the number of China may be only a dozen. Technology iteration, cost control, and even started a big price war. Volume technology, volume price, volume cost, volume innovation. I estimate that in the end, China can really do bigger and stronger new energy vehicle enterprises can have five is very good, this is also in line with the law of history, the remaining is king. Now going overseas and high-end is also the direction of our attention. Can you tell us something?
Zhang Zhen: Let's talk about the high-end problem, is the new energy brand likely to become the luxury car brand in everyone's mind. An interesting landmark event of this year's Beijing Auto Show is that 360 Chairman Zhou Hongyi sold his Maybach to pick out new energy vehicles. I have a special big feeling, ten years ago, the most crowded booth must be the traditional luxury car brand. Now the most people must be the new energy brand. Young people, in particular, have seen cognitive changes in their minds.
Ren Zeping: I once asked these young people that the more young people, the more they like new energy vehicles. Now more and more smart money, smart people, and smart technology are entering the new energy industry. New energy vehicles iteration is particularly fast, fuel vehicles will become very mechanized. Once they run the tram, they think they can't get back.
Zhang Zhen: It is really more intelligent, understand you better. And from the actual sales volume is also the choice of the market. In April, for example, the Q M9 sold a little 30,000 units, which seems to have exceeded the BBA combined. The actual market is also paying for the high-end cars of China's new energy brands.
Ren Zeping: How do new energy vehicles define luxury cars? The luxury car brand of fuel car, the first brand force is strong, sponsoring the major events. The second is the pile, the engine, leather seats and so on. That in the field of new energy vehicles, how do we see it?
Zhang Zhen: First of all, in the future, for autonomous driving above L2, we will think more about safety. On this basis, it is what kind of world outlook and values are conveyed by the sense of experience and the whole brand culture. The third is some core configuration, such as its range. The fourth one is the after-sales service. New power brands attach special importance to building their own communities and deeply connecting users with common values.
Ren Zeping: At present, the penetration rate of new energy vehicles is increasing rapidly, especially in China. Related to the policy, our local car companies are also very competitive. Some people told me that the development speed of new energy vehicles in Europe and the United States is far less than that in China.
Zhang Zhen: Europe and the United States did not give up, but subject to objective factors and slowed down. The first is taxes. In the European Union, for example, their fuel taxes are very high. According to the data, the IEA lost $10 billion in fuel taxes last year because of the global development of electric vehicles. At this rate, at the goal of electrification global transportation, tax losses should be $10 billion by 2035. What is the money used for? It is mainly about road maintenance and traffic improvement. In fact, many of the phenomena are behind the economic problems. The biggest loss involved is in Europe. Europe accounts for the bulk of the global tax revenue, and the fuel tax should be 60%. Although our country also collects less, but it also pays less for the cost of oil imports. The development of electrification reduces the dependence on oil imports. Second, Europe and the United States have found that their control and competitiveness in the entire automotive supply chain have lagged behind. And the automobile industry also has a characteristic, as long as there is no scale, the early stage is the loss. Last year, for example, Ford lost $4.7 billion on 40 percent of its total on electric cars. Including the Volkswagen ID3, which sold well last year, officials said it lost 40,000 yuan. Their own electricity price is also high, and much of the infrastructure investment is socialized investment, which leads to the slow speed of building the whole industrial ecology, and the resources and funds needed are huge. In the context of the global economic slowdown, it is hard to devote so much capital resources to develop the industry. New energy vehicles are not only a technology integrating new energy, but also an important industry integrating new materials, advanced manufacturing and artificial intelligence. It is a very certain development direction of the automotive industry around the world. Europe and the United States do not say that they do not want to follow, but that they do follow a little slower. However, the official did not see any country or enterprise to give up the transformation direction of electric new energy, only subject to the slowdown of objective factors.
support. After the scale is up, you can spread the cost down. The second is large-scale infrastructure, and China's car-pile ratio target is one to one. In the United States, including Europe, the car-pile ratio is far behind us. That is to say, when they use new energy vehicles, charging is very difficult to do. China's new energy industrial policy has been successful on the whole. Because we have a big market of 1.4 billion people, it can quickly build into a scale advantage. The first-mover advantage of policy, the advantage of infrastructure, and the scale advantage of the large market are all reflected in the field of new energy vehicles. In fact, Europe and the United States do not give up, he has now taken several ways to deal with it. First, the United States imposes additional tariffs. China's new energy vehicle exports to the United States first doubled, adopted this approach. Second, with the advent of the artificial intelligence revolution led by openAI, their ability to do intelligence is not to be underestimated. China's new energy vehicles into the knockout competition, in fact, the global new energy vehicle pattern is also rewriting. In the original era of fuel cars, the world's big players are concentrated in the United States, Europe, Japan. In the era of new energy vehicles, it is obvious that the transformation of Europe is slow, and the whole global pattern is also being rewritten. China and the United States are now in the first tier, while Japan, South Korea and Europe are in the second tier catching up. Just now, Europe and the United States can not talk about giving up electric cars, but China has some first-mover advantage, scale advantage. Of course, let's not be careless, either.
Zhang Zhen: Because they now have a high tax price and the other has some bills, such as the new battery bill, which also put a lot of pressure on enterprises. They really want to bring some of our supply chains through there. I think we have to go out to sea rhythmically, too.
Ren Zeping: Now the industry has a talent shortage, China's new energy vehicles have entered the knockout stage, and the industry pattern of the remaining ones being king and the strong will gradually emerge. What is the competitiveness of China's new energy vehicles in the world?
Zhang Zhen: The current competitiveness may be mainly the price. In the large pool of new energy vehicles, the market share of state-owned independent brands has exceeded 50%, and the vehicle exports first in the world. Technology is also very advanced, now more than hundreds of thousand cars in the past may look like two, three hundred thousand cars, configuration is very luxurious. But now also face a very realistic problem, may finally be able to survive is a few enterprises. And looking at the financial statements may only a few enterprises make money. In order to do the market, many enterprises are currently in an unprofitable state. The sustainable development of a company is about to be profitable. The premise of no profit is that although the quantity is reached, the brand or premium is not sold. I think we should advocate orderly sea, we have a consistent strategy in price. After more than a decade of precipitation, we should eat a wave of market price dividends back, and earn the profits into the research and development of the new generation of technology. What is needed now is to consider sustainable development. One is how to be sustainable from a supply chain perspective, including key mineral resources upstream. Now many enterprises also began to pay attention to the recycling of batteries, reduce the dependence on the upstream key minerals, in fact, is a very good positive signal.
Ren Zeping: China's new energy vehicles in recent years are not simply a price war, but also depends on the ability of industrial chain and supply chain. In recent years, in the research and development and brand power construction, the car companies have made a lot of breakthroughs. For example, China's three electric technology has formed a closed loop. More than 30% of the cost of new energy vehicles comes from lithium batteries. Six of the world's top 10 companies, including lithium batteries for new energy vehicles, are from China. Of the global shipments, 60% of lithium power comes from China. As you can see, in recent years, although the technology of new energy vehicles is becoming more and more mature and the market competition is becoming more and more fierce, the car companies are still iterating its technology. Byd recently launched the fifth generation of the DM system, which is a gas-electric hybrid technology with a combined range of 2,000 kilometers. Therefore, the rise of China's new energy vehicles is not simply a price war, nor is it simply an internal volume, but to enhance the competitiveness of the industry through technology. I also very appreciate the "head to do research and development" enterprises, to promote the healthy development of the industry. Like BYD founder Wang Chuanfu is himself an engineer, his thinking is that the roll price is not as good as to roll technology.
Zhang Zhen: Yes, sometimes cost reduction depends not only on scale, but more importantly, on technological innovation.
Ren Zeping: Some time ago, Yellen and others visited China and raised a big topic. They say China's overcapacity of new energy vehicles is dumping on Europe and the US, so tariffs will be imposed. Do we really have excess capacity?
Zhang Zhen: Demand saturation is called surplus. In fact, from the international scope of new energy vehicles, the demand is far from the peak, more is the need for product update iteration. Last year, new energy vehicles were sold for about 14 million yuan worldwide. The IEA, an international authority, predicts that there will be 45 million vehicles by 2030, and our demand for replacement space and new products is still far from saturated. However, there is a characteristic that the technical products of new energy vehicles are fast, and each iteration will have a large number of enterprises and capital investment to form new capacity. The old capacity that did not adapt to the competition was forced to clear. For example, the energy density ratio of the battery is higher, the original range of 200 kilometers will be eliminated, and the corresponding model will also be eliminated. So the new capacity and the old capacity is a norm for any emerging industry. Yellen said that when we have overcapacity, it is essentially trade protectionism, because our products are too cheap, have too much impact on their market and are too competitive. Some people say that we are subsidies, but in fact we only fill earlier, now the United States is more than we fill. Our new energy vehicles now in addition to the purchase tax has a little subsidy, other has no.
Ren Zeping: As for overcapacity, in fact, the demand is far from being there. However, because of some trade frictions and trade barriers, European and American users are not satisfied. After the satisfaction, there is no so-called overcapacity of China's new energy vehicles.
Zhang Zhen: I think our enterprises should be more united, especially in the pricing strategy. For example, there is no need to sell so cheap, but we can eat a wave of price dividends, so that the market impact on the other side should be a little smaller. At the same time, we also need to gradually release production capacity.
Ren Zeping: Some time ago, I took our business school entrepreneurs to Foshan, Guangzhou for a study tour to learn the logic of going to sea. We used to be a global village, but now we are the fragmentation of globalization, trade protectionism and regional integration. In order to occupy the local market, you need to invest in the market there. If you do not invest in the market there, the local tariffs may be increased. For example, in the Indian market, Xiaomi suffered a big loss there, was fined billions, several in and out. They will not simply give up the market, but hope that the enterprise to invest here, hope that the core components of the enterprise to stay in the local, the localization rate should reach a certain proportion.
Zhang Zhen: But I think we should also pay attention to the rhythm. In the past, the developed countries of the automobile industry, such as the so-called industrial hollowing out in the American industry, have provided a lot of policies to bring these industries back home. And Japan and Germany, the automobile industry is their pillar industry, even if they go overseas, they will keep their core research and development local. If we go abroad on such a scale, it also brings us a risk, which is the problem of employment. We also need to prevent our industry from losing its core competitiveness, so I think we should grasp the rhythm in an orderly manner.
Ren Zeping: Thank you very much for your listening. Here we also wish our excellent entrepreneurs and enterprises, their continuous iteration of technology, stronger and stronger brand power, and going to the world. I would like to thank President Zhang and add fuel to China's new energy vehicle companies.