Song Yining, Head of Battery Division at Leapmotor: The battery industry has matured, and it is a good time for automakers to carry out independent in-house R&D of batteries | 36Kr Exclusive Interview

"The battery industry is already very mature, which is exactly why we are entering it."

In September, Li Auto announced that it would promote its self-developed "Li Auto-branded" batteries to all its vehicle lineups, while Xiaomi Auto officially announced that Sunwoda and CALB have become strategic partners for its self-developed "Longjia Battery". The move of car manufacturers independently developing batteries has become the focus of public opinion, along with widespread industry doubts over the necessity of carmakers developing their own batteries and the performance of carmaker-branded batteries.

Song Yining, Senior Vice President of Leapmotor Technology and Head of Battery Product Line, put forward an "anti-consensus" view against the mainstream industry opinion. In his view, the battery industry has been fairly mature, which is exactly the best window for carmakers to get deeply involved in the battery industry.

"Now the production equipment is very mature, with only two or three leading players; battery materials are very mature, also with only two or three top suppliers; the prices are also completely transparent. The battery industry is already very mature, that's exactly why we choose to enter it."

Song Yining's confidence comes from the fact that Leapmotor is one of the earliest carmakers that started and went farthest in self-developing batteries among all vehicle enterprises. This is reflected in that Leapmotor began to explore and adopt standardized cells and self-develop battery Pack as early as 2018, and implemented a battery supply chain model with penetrating management on suppliers, which is exactly the strategy adopted by Xiaomi's "Longjia Battery", Li Auto's self-developed battery and other carmakers' self-developed battery projects today.

It can be said that Leapmotor's battery supply chain model is not only the predecessor of the self-developed battery system that the industry has begun to promote today, but also one of the earliest practices of carmakers deeply participating in battery R&D and production.

In addition, Leapmotor is also one of the early carmakers that achieved mass production of CTC. CTC is an integration solution that fuses the battery pack with the whole vehicle. Tesla first publicly released this solution, and some domestic brands followed suit afterwards. But Leapmotor is one of the few enterprises that realized large-scale mass production and loading of CTC on vehicles. At the same time, Song Yining believes that except Leapmotor, no carmaker or battery manufacturer has achieved real large-scale mass production of CTC on vehicles, because their battery packs are still independent and not integrated with the whole vehicle.

Not long ago, we had an in-depth interview with Song Yining, where we had thorough exchanges on Leapmotor's journey of developing standardized batteries, as well as its understanding and foresight of the battery industrial chain.

Song Yining recalled to 36Kr that in the early stage, Leapmotor had quite a lot of cell types, and the company found it very difficult to manage and control. "At that time, if we customized a non-standard cell, we couldn't reach the corresponding sales volume of vehicles, and we would even have to pay compensation to suppliers", which once put Leapmotor under huge pressure.

Therefore, starting from 2018, Leapmotor tried to "standardize cells", and planned the size and capacity of batteries at the beginning of the development of each platform. At the initial stage, Leapmotor had 4 to 5 types of standardized cells. "That was three years ago, and now we have gradually streamlined them to two or three types", "The 148 model has been used for 8 years, and the 208 model has been used for 5 years".

In addition to promoting the popular single cell product, Leapmotor also implemented in-depth management and control on suppliers, especially penetrating into many details. Song Yining told 36Kr that Leapmotor "even manages and controls the whole production line for them", "On the production line, for example, where additional testing equipment needs to be added, and where process control is not in place, we will give them targeted suggestions".

As Leapmotor's sales volume has been rising year by year, and the company is sprinting for the annual sales target of 2 million units, Leapmotor has further penetrated into the cell manufacturing end.

At present, Leapmotor has launched the model of building joint ventures with battery manufacturers. Leapmotor did not follow the traditional path of "carmaker provides capital while battery manufacturer produces batteries", but introduced new connotations of cooperation. For example, Leapmotor will participate in the procurement, standard formulation and logistics planning of the joint venture, and send core personnel to some key departments; Leapmotor is directly involved in the procurement of positive and negative electrode materials, separators, electrolytes and production equipment.

It is understood that the model of jointly building battery factories combined with the standardized cell strategy can push Leapmotor's manufacturing efficiency to the extreme. For example, each production line only produces one battery model, realizing 365 days of non-stop operation and no model switching, thus greatly reducing manufacturing costs.

This may be exactly the core significance for carmakers to deeply participate in and lead battery R&D, and even battery manufacturing today.

"After the (battery) industry enters the commercialization stage, we need to pursue differentiation, including differentiation in manufacturing and differentiation in performance." Song Yining said.

On carmakers entering the battery sector: The battery industry is mature, and the time is ripe for carmakers to get involved

36Kr Auto: The battery industry has developed for 10 years and now entered the stage of commercialized procurement, but carmakers still choose to develop batteries in person. What do you think of this phenomenon?

Song Yining: In fact, batteries have been commercialized in the past 3 to 5 years. Not to mention 10 years ago, even 5 years ago, it was not commercialized yet, it was still in the technology-oriented stage where some players could make qualified products while others could not.

The industry starts to be commercialized now because the top leading players have reached a similar level of capability. But after commercialization, why do we still need to develop batteries by ourselves? I believe there is still much room for innovation in the cell sector. Moreover, if the whole vehicle manufacturer develops cells, there will be better integrated innovation. There are also many things that battery manufacturers cannot do but only whole vehicle manufacturers can do, as I mentioned several points to you just now, such as non-stop production lines.

Second, we believe that the commercialization of batteries is already very mature, which is exactly why we get involved in this sector.

Now the equipment is very mature with only two or three leading players; materials are very mature with only two or three top suppliers; the prices are also completely transparent, because I am in charge of the procurement of the joint venture. The battery industry is already very mature, that's why we enter it. After the industry enters the commercialization stage, we need to pursue differentiation, including differentiation in manufacturing and differentiation in performance.

I can give you an example. For the A10 model priced at 60,000 to 90,000 yuan, and the D99 model priced at more than 300,000 yuan, the 300,000-yuan vehicle must adopt materials with high fast-charging rate, long cycle life and higher performance, probably the fourth or fifth generation lithium iron phosphate, because it has higher and more comprehensive performance requirements, which also means higher costs.

But is it necessary for small low-priced vehicles? They don't even need a high-voltage platform, 400 volts is enough, and the charging speed is also very fast. For the 60,000 to 100,000 yuan small vehicle, we sell more than 30,000 units per month, which requires 1.5GWh of batteries per month, and nearly 20GWh of batteries per year. If we produce batteries by ourselves, we can make targeted products for this specific vehicle model.

Our batteries are already standardized, we can switch to a more suitable material for this specific vehicle model to reduce the cost, cut the battery cost by 1000 yuan, pass this 1000 yuan of benefit to users, and just match the performance of this vehicle.

Many top battery manufacturers told me that they have thousands of battery products, more than 1000 types in total. Even though they have a large number of employees and do a good job, their R&D expenses cannot be reduced to a very low level because they have too many projects.

So I was thinking, if we concentrate our efforts on making one single hit product, with one material system, two sizes, make this product a total hit, simplify complex things to the utmost, why can't we produce it by ourselves? Self-production can give us stronger control, and achieve better integration with the whole vehicle, which is the key in the electrification era, to maximize the things that only whole vehicle manufacturers can do.

In addition, producing half of the batteries ourselves and purchasing the other half can also hedge certain risks. Since vehicle sales have seasonal fluctuations, we can still adjust the production and procurement volume flexibly.

On battery standardization: With annual sales of millions of vehicles, we only develop 3 types of cells

36Kr Auto: Under the circumstance that the whole industry is facing huge cost pressure, what effective cost reduction strategies does Leapmotor have in the battery sector?

Song Yining: It mainly comes from Leapmotor's innovative and differentiated philosophy.

Do you know where Leapmotor's cells win? I started to promote standardization as early as 2018. We can be said to be the leader of battery standardization among global carmakers. Many players are doing standardization now, and quite a lot of them are using the existing solutions we developed.

From 2018 to this year, we have produced 1 million battery packs, and we basically only use three types of cells. The advantage of this practice is that we can reduce costs in an all-round way. Moreover, this is something that only carmakers can do, and other battery manufacturers can hardly achieve. Because battery manufacturers serve many different whole vehicle manufacturers, they have a huge number of cell models and cannot implement self-standardization, as each carmaker has its own requirements.

So what is their biggest pain point? I have asked top cell manufacturers, the best-performing ones need to switch production models 5 times a year at the minimum, and switching more than 10 times a year is very common.

What problems will model switching cause? Others need 15 days for model switching, and 10 days for production ramp-up, which means 25 to 30 days of wasted time. Even for the most capable enterprises, if we calculate the lost production capacity of 15 days each time, switching 5 times a year will waste 75 days, which is two and a half months. There are 12 months a year, and they can only carry out production for 9.5 months, which will definitely increase the manufacturing cost.

Cell standardization also brings stable cell quality. Many heads of battery manufacturers have told me that cells are large-volume single products. If you keep switching models, the production line is so long with so much equipment, when you switch to a new cell model for production, the quality in the first two or three months is not satisfactory, because the equipment has not run stably yet. Even the most capable enterprises need 4 months to make the production run stably, and less capable ones need more than 6 to 8 months.

What is a major pain point of the current industry? Many vehicle models are updated once a year, before the cell model is sold for a full year, the manufacturer switches to a new cell model. The cell quality has just been optimized, but you switch to another cell model, without standardization, so the quality can never be well guaranteed.

But we adhere to the "less is more" philosophy, simplify complex things, and keep improving. I defined this cell model in 2018, and it has been 8 years up to now. Just imagine, we have been focusing on doing one thing for 8 years, how can we not make it well?

Now everyone is discussing quickly developed vehicle models, our standard cells have 6 to 8 years of product accumulation, who can compete with us in product quality? Therefore, the quality of our entire battery pack now is 3 times higher than the industry average, which means the failure rate is only 1/3 of the industry average level.

So our standardized cells have become best-selling products in the industry now, many carmakers are using this cell model we developed. The 148 model cell has the best sales volume, and the 208 model is also adopted by many players.

36Kr Auto: Speaking of battery standardization, what aspects does Leapmotor standardize? Is it size, capacity, or voltage?

Song Yining: We have in-depth intervention in size, capacity, charge and discharge rate, and raw material selection.

36Kr Auto: How does Leapmotor conduct quality control on cells?

Song Yining: In the past 10 years, we have arranged many responsible personnel for cell management. To what extent have we penetrated? We even manage and control the whole production line for suppliers. On the production line, for example, where additional testing equipment needs to be added, or where the process control is not in place, we will give them targeted suggestions and requirements.

When the battery manufacturer's production line is in the ramp-up stage, we will send more than ten employees to work on the production line together with their teams. In fact, we are helping them to make better cells.

Moreover, our standards are far higher than the industry standards, even top-tier cell manufacturers have told me that our standards are extremely strict.

But I told them it's fine. You may think the standards are too high today, but after you finish producing our standardized cells, you won't think the standards are too high one year later. The reason why you think the standards for other products are too high is that those products are not standardized, you are required to switch to new products before you can optimize the existing products well. In fact, the electrochemical system of cells cannot be well developed within one or two years. Only after continuous production for more than one or two years can you master the real core know-how.

Sure enough, one or two years later, those manufacturers told me that they had made great progress, and the quality is now very stable. All cell manufacturers said so.

Everyone is discussing which cell is good and which one is poor. In fact, there is not much difference between current lithium iron phosphate batteries, especially for Leapmotor's products.

Because we are now deeply involved in the equipment procurement and raw material procurement of cell manufacturers, we find that the battery industry is actually very concentrated. For each type of equipment, there are no more than three suppliers that can make really high-quality products; for each type of material, there are no more than three top suppliers. In the past three years, the cell process has also been very mature, and the environmental control has also been standardized.

Therefore, lithium iron phosphate cells are already very mature large-scale industrial products. Ten years ago, there were indeed obvious differences between different manufacturers, but the differences have been very small in the past 3 to 5 years.

Moreover, all cell manufacturers that produce our standardized cells have far better product quality than when they produce batteries for other carmakers.

For example, one enterprise has been producing this specific cell model, the 148 model, for 7 to 8 years. To be honest, the quality was not that good at the beginning, but we insisted on asking them to keep producing it, and they made very good products one year later. Now almost every of their production bases can produce high-quality products, and the quality level is no different from top-tier enterprises. This is all because of standardization, focusing on doing one thing for 7 to 8 years, you can definitely make it well.

36Kr Auto: Were these standards explored by Leapmotor in the vehicle manufacturing process, or formulated at the very beginning of vehicle manufacturing?

Song Yining: It's mainly because we did a very good job in planning. Each vehicle has a corresponding platform, for example, the A, B, C, D platforms. We calculated in advance what capacity the battery size can reach, and made the plan in advance.

Of course, we originally had 4 to 5 types of cells three years ago, and now we have gradually streamlined them to two or three types. But we have been adhering to standardization all the time: the 148 model has been used for 8 years, and the 208 model has been used for 5 years.

36Kr Auto: What are the bottlenecks in implementing standardization? Why didn't other carmakers do it, but Leapmotor can stick to it for more than ten years?

Song Yining: You need to make correct strategic decisions, the direction is very important. The reason why we can succeed is that Leapmotor wins in efficiency, decision-making, and our organizational structure mechanism.

First of all, one of our biggest advantages is that since Mr. Zhu founded Leapmotor, he has taken the battery sector as a first-level department under his direct management, and uniformly planned and controlled batteries as core components.

But in many carmakers, batteries are classified as ordinary components, which are managed by the whole vehicle department. Traditional carmakers follow the logic that the vehicle defines the battery: you produce whatever battery the vehicle needs. This logic is definitely not feasible in reality. The investment in building a battery factory is no less than the total investment of the whole carmaker. The battery and the vehicle should be co-developed, and sometimes the