70% of the domestic replacement space left who will be Tesla’s next supplier

Tesla’s Shanghai plant started construction in January 2019, obtained a comprehensive acceptance certificate in August, obtained the Ministry of Industry and Information Technology in November, and achieved production from plant construction to production in just 10 months, with a faster-than-expected construction schedule. Meanwhile, Tesla’s latest production and price cuts have exceeded market expectations. This completely ignited the market in the secondary market Tesla industrial chain company.

Related sources revealed that the current Tesla Factory in Shanghai off-line vehicle parts localization rate reached 30%, the middle of this year up to 80%, the end of the year will achieve full domestication.

70% of the domestic replacement space left who will be Tesla's next supplier

Tesla continues to exceed expectations

On January 3rd Tesla reported its 2019 production and sales, with production and deliveries breaking 100,000 vehicles for the first time in the fourth quarter, well above market expectations. In the fourth quarter, vehicle production was 105,000 units, up 9.1% quarter-on-quarter, and delivery was 112,000 units. On the Model 3 side, Tesla delivered 93,000 vehicles in the fourth quarter, or 87,000 units, up 8.9 percent quarter-on-quarter.

In terms of capacity, model 3 production capacity reached 6,617 units in the fourth quarter of 2019, compared with 6,075 units in the previous quarter. The agency believes that the Model 3 capacity at Tesla’s Fremont plant in the United States is now nearly saturated, and that the new Model Y is being delivered, and that the Fremont plant is bound to give the Model Y a production line to meet production targets, meaning that the Tesla Plant in Shanghai will take up the Model 3 Capacity increment. Production at the Shanghai plant is now under way and nearly 1,000 Model 3s will be produced in the last two weeks of December 2019, with the target of 3,000 vehicles expected to be gradually achieved by 2020.

Model 3 also has an advantage in terms of price. On January 3, the domestic Tesla Model 3 price was reduced from 356,000 yuan / vehicle to 324,000 yuan / vehicle, overlay to enjoy 25,000 yuan electric vehicle car purchase subsidies, to the hand price fell to 299,000 yuan, the price reduction greatly exceeded market expectations.

In terms of cost, the Shanghai Port-to-Port plant is lower than the Fremont plant in the United States in terms of land rent, plant cycle, hourly wages for construction workers and loan costs. According to Henyep Securities estimates, the domestic Model 3 compared to the U.S. version of production costs reduced by 20% to 28%, gross margin significantly higher than the U.S. version.

In addition, potential competitive models of the domestic Model 3, such as the Volkswagen MEB platform, are not expected to be available until the end of this year and beyond. Therefore, Hyer Securities believes that the domestic Model 3 products are competitive and will be substantially released.

This presents opportunities for the domestic Tesla industrial chain. Late last year, sources revealed that Tesla’s Shanghai plant had achieved 28 vehicles per hour, meeting design requirements. At present, the localization rate of off-line vehicle parts reached 30%, the middle of this year can reach 80%, the end of the year will achieve full localization.

Which companies are already within this 30% localization rate, and who will share 70% of Tesla’s home-grown cake in the future?

70% of the domestic replacement space left who will be Tesla's next supplier

Yangtze River Delta suppliers have more advantages

As domestic suppliers mature, domestic suppliers continue to join Tesla’s supply chain system.

The Shanghai municipal government is also promoting the development of smart net-linked new energy vehicles in the new area of the FTZ, and providing supporting services to auto companies such as Tesla, which own seamounts in the region. In September last year, lingang new area held a signing ceremony to promote the development of the new energy vehicle industry and key projects of the smart network link, including manufacturing, application, service and functional platform four types of a total of 24 smart network joint new energy vehicle key projects signed, involving a total investment of nearly 8 billion yuan.

The company that signed the day also included Tesla’s suppliers, including automotive glass supplier Saint-Gobain and Grebo Smart Power Technology Co., Ltd., which mainly produces electric motors, electronic controls, batteries and other automotive electric drive systems. Under the plans, they will lay out new capacity in Port-by-Port to meet Tesla’s needs. More supply chain companies will follow Tesla’s China production pace and increase production capacity in China in a timely manner to meet the production needs of their Shanghai plants.

At present, most of Tesla’s core technology suppliers come from Japan, the United States and Europe, and Chinese companies mostly enter the supply chain system as secondary raw material suppliers. With Tesla’s local production, some suppliers of core technologies are also accelerating domestic production plans, which will further enhance the supply advantage of domestic companies. The Yangtze River Delta region’s domestic parts companies have advantages over foreign companies, and there will be greater opportunities to further increase the proportion of Tesla’s supply in the future.

First financial reporter combed found that the current suppliers in the Yangtze River Delta mainly include: for domestic Tesla to provide interior and chassis structure parts of the Top Group, to provide seat assembly and exterior of the Huayuan car, to provide sensors, human-computer interaction system of the winning electronics, to provide thermal management system parts of the sanhua intelligence control, Xusheng shares, which provide lightweight components for cast aluminum, Wencan shares for Tesla, Changal shares, and Changxin Technology, which provides automotive electronic synth screen modules, are provided.

Power battery localization is worth looking forward to

As Tesla continues to exceed expectations, its industrial chain companies have become a hot spot in the secondary market.

On the evening of January 5, Amaton announced that the company had become a qualified supplier to Tesla in recent years and would gradually release solar tile glass from 2019. On January 6th Amaton closed down.

Power batteries are perhaps the most anticipated part of Tesla’s domestic replacement space by 2020.

According to Guojin Securities Research Report, the value of the various parts of the Tesla Model 3 is: 38% of the power batteryassembly system, 24% of automotive electronics, 12% of body and interior, 11% of electric drive system, 11% chassis, 4% of the high-voltage system.

Currently, the power battery supplier at Tesla’s Shanghai plant is the LG Nanjing plant, where the plant’s 2170 battery line is ready, and Suzhou Lishen’s 2170 battery is in Tesla’s alternative program. But since the Force 2170 battery is not fully compliant with Tesla’s requirements in terms of consistency, The Force Can only act as an emergency supplier.

The core is the core component of the power battery, accounting for 75% to 78% of the cost of the battery. LG’s Nanjing plant said it could supply 30 million cores a month for Tesla next year, which could meet the need slot for 8,500 cars based on a Model 3 equipped with 60 kWh. By this measure, if Tesla’s Shanghai plant were fully loaded, there would be a large gap in the battery. At present, the domestic mainstream battery suppliers to produce soft-packed batteries, and Tesla’s demand for cylindrical batteries is very different, in addition to LG Nanjing plant and Suzhou Lishen, Tesla in China has not many options.

From the POINT of view of LG’s core supply chain, when Sheng technology is its positive material supplier, fir shares as a negative material supplier, Enjet shares, star source materials for diaphragm suppliers, new Zeus, God-given materials for LG supply electrolyte.

“Tesla’s localized supply chain is challenging,” a senior auto industry source told First Financial. Supply chain localization needs to take one to two years to grow, and if Tesla is to cut prices, the core electric car core part of the two-year-old electric car must be domestic, or it will cost money. “