Electric Car Battery Market Continues Rapid Growth

Tianneng Power will continue to advance its R&D efforts in electric car and electric bike motive batteries, as well as wind energy and solar power storage batteries, and Ni-MH and Li-ion batteries so as to continue its progress in product innovation and market leadership.


Tianneng Power International Limited (“Tianneng Power” or the “Company”), China’s largest electric vehicle motive battery supplier, together with its subsidiaries, (the “Group”) (stock code: 819.HK), announced its unaudited interim results for the six months ended 30 June 2012.

In the first half year of 2012, the Group’s turnover increased significantly by 56.9% to approximately RMB3,825 million, benefitting from the growing market demand for electric bikes and electric cars, favorable policies implemented by the Central Government, and further consolidation of the industry. Gross profit surged 79.9% to approximately RMB986 million while gross profit margin also increased to 25.8% from 22.5% over the same period last year. Profit attributable to equity holders of the Company increased by 87.2% to approximately RMB376 million. Basic earnings per share were RMB34.4 cents. The Board of Directors did not recommend payment of an interim dividend for the six months ended 30 June 2012.

Mr. Zhang Tianren, Chairman of Tianneng Power, said, “Driven by the environmental protection policies and actions of the Central Government in 2011, the lead-acid motive battery industry has undergone consolidation. As a result, a number of underperforming enterprises have been eliminated. In the first half of 2012, Tianneng Power captured the opportunities brought by the industry consolidation and thus achieved satisfactory results with strong growth in both turnover and profit. To lay a solid foundation for its long-term business growth, the Group has continued to diversify its business, including actively forging strategic alliances with electric bike manufacturers and new energy vehicle enterprises and further expansion of its distribution network. In addition, the Group has started trial operation of its used battery recycling business, which is expected to reduce production costs and increase profitability of the Group.”

Electric Bike Motive Battery Business
In view of the steady growth in the electric bike industry and the recent consolidation, the Group continued to secure premium customers in the primary market while establishing strategic alliances with electric bike manufacturers. During the period under review, the Group’s primary market sales revenue rose by 27.3% from the same period last year and accounted for approximately 34.4% of the turnover of lead-acid motive batteries. The increase in the total number of electric bikes in China drove stronger demand in the secondary market for motive batteries. In view of this, the Group has expanded its sales network, and increased the number of exclusive distributors from 952 as at 31 December 2011 to a total of 1,109 during the period under review. The sales revenue from the secondary market powered ahead by 79.9% from the same period last year and accounted for approximately 65.6% of the Group’s total turnover of lead-acid motive batteries. The strong secondary market sales network has already become the Group’s core competitive advantage, and has also helped to reinforce the recognition by primary market customers of Tianneng Power.

Electric Car Motive Battery Business
Leveraging its well established brand as well as its expertise in the electric bike lead-acid motive battery industry, the Group has initiated collaboration with a number of new energy vehicle enterprises in the period under review. It has also started forging sales, distribution and after-sales service networks for new energy vehicle motive batteries. The Group’s efforts are gradually generating results. In the period under review, the Group earned a revenue of approximately RMB196 million from the sale of pure electric car batteries, up by 76.0% as compared with the same period last year, accounting for approximately 5.1% of the Group’s sales turnover. It now has a total of 16 distributors. The State Council issued the Energy Saving and New Energy Vehicles Industry Development Plan (2012-2020) in June this year, which indicates that China will speed up the development of the new energy vehicles industry, and support the business of sustainable motive battery enterprises. The Group is well positioned to seize this huge opportunity. Moreover, the low-speed electric car has reached a critical stage for the electric car industry as new energy vehicle enterprises have started mass production. The Group will closely monitor the development of low-speed electric cars and their take-up in the market, in order to plan its own contribution to the development of pure electric cars industry in China, as well as to further expand its related business.

New Energy Storage Battery Business
The Group’s efforts to strengthen R&D and market expansion of storage batteries resulted in a steady growth in sales revenue of 37.5% as compared with the same period in 2011. In the future, Tianneng Power will continue to enhance R&D in technology and battery applications while building up its market in a bid to further strengthen its storage battery business.

Used Battery Recycling Business
The Group’s recycling plant located at the Zhejiang Wushan production base commenced trial production in the second quarter of 2012. The plant has an annual capacity of collecting 150,000 tonnes of used batteries, while producing 100,000 tonnes of recycled lead. The Group also plans to build the second recycling plant in Henan Puyang production base, with construction targeted to be completed in 2014. Tianneng Power will leverage its extensive battery distribution network to collect used batteries, which creates a strong foundation for the Group to reach its goal of becoming the model enterprise of both motive battery production and battery recycling operation in China, through the possession of the best technology, facilities and talent.

During the period, Tianneng Power continued to focus on technological innovation and R&D. It has developed three battery products for new energy vehicles and obtained 18 technological innovation-related patents, among which the “EV high-performance cylindrical lithium battery” and “nanometer manganese source lithium battery” have received strong Government support. At the same time, the Tianneng Energy Research Centre will step up efforts in the R&D of electric car batteries. After the successful launch of the new generation rare earth silica gel batteries in May 2012, the Group plans to launch nanometer rare earth silica gel batteries. In addition, the Group has devoted more efforts in brand promotion by inviting Liu Qian to be the celebrity spokesperson to express Tianneng’s brand promise of promoting better quality of life. The Group also partnered with the China Space Foundation to bolster China’s development of astronautics.

In a noteworthy development, the Ministry of Industry and Information Technology and the Ministry of Environmental Protection of PRC have jointly announced the “Entry Requirements of the Lead-Acid Storage Batteries Industry” in July. It regulates both the existing and new lead-acid batteries factories setting forth a series of requirements on plant location selection, production capacity, use of automation, environmental protection, occupational safety and recycling. It is believed that these entry requirements would speed up the consolidation of the industry as a whole, stimulating its healthy development. The Group is also closely monitoring this consolidation in order to devise suitable strategies for sales, mergers & acquisitions and strategic partnerships aimed at further enlarging its market share and bolstering its leading position.

Mr. Zhang concluded, “To capture the opportunity brought about by industry consolidation, Tianneng Power will continue to advance its R&D efforts in electric car and electric bike motive batteries, as well as wind and solar storage batteries, and Ni-MH and Li-ion batteries so as to continue its progress in product innovation and market leadership. As energy saving and environmental protection are the important parts of China’s strategic emerging industries, we will further build and optimise production capacities in our seven production bases including the Zhejiang Changxing Headquarters, as well as the Zhejiang Meishan, Zhejiang Wushan, Anhui Wuhu, Anhui Jieshou, Jiangsu Shuyang and Henan Puyang production bases. By doing so, we believe we will be ready to excel through the evolution of global automobile industry in the next decade.”