Gotion High-Tech’s 8 Billion Investment in Solid-State Batteries Signals Aggressive Expansion Strategy

An 8 Billion Investment in Solid-State Batteries! Gotion High-Tech, a leading second-tier lithium battery manufacturer, is aggressively expanding its operations.

In the competitive landscape of the power battery sector, dominated by industry giants like CATL and BYD, Gotion High-Tech has shown a strong determination to carve out its own niche. Recently, the company announced plans to invest 40 billion yuan each in Nanjing, Jiangsu, and Wuhu, Anhui, to establish advanced lithium-ion battery manufacturing bases, with a total investment reaching 80 billion yuan. This move aims to bolster the production capacity of solid-state batteries. This announcement follows Gotion’s earlier declaration in December 2024 about plans to set up production bases in Morocco and Slovakia.

As of 2024, the global power battery market faced an oversupply situation. According to SMM statistics, the total global lithium-ion battery production capacity reached 4315 GWh, while EVTank reported that global lithium battery shipments hit 1545 GWh, resulting in a mere 36% capacity utilization rate. In this context, Gotion’s decision to expand its production capacity significantly demonstrates its commitment to overcoming challenges.

Indeed, larger production capacity typically enhances a company’s influence within the industry. However, Gotion’s recent financial reports highlight potential risks associated with its aggressive expansion. According to the latest semi-annual report, Gotion’s total liabilities soared to 81.78 billion yuan, with a debt-to-asset ratio of 72.22%. Short-term loans alone accounted for 19.3 billion yuan, and non-current liabilities due within a year amounted to 8.277 billion yuan. In contrast, prior to its major expansion in 2021, Gotion’s total liabilities stood at just 24.24 billion yuan, with a debt-to-asset ratio of 55.58%, indicating a significant increase in debt levels.

Gotion High-Tech’s history dates back to 2005, founded by Li Zhen. After a successful venture in real estate, he recognized the short lifespan of solar-powered streetlights due to battery inefficiency. This realization sparked his interest in battery technology. Shortly after, he began researching battery and energy storage technologies, capitalizing on breakthroughs in domestic lithium battery technology supported by national initiatives. In 2006, he established Gotion High-Tech, focusing on lithium iron phosphate (LFP) batteries, which emerged as a dominant technology in the industry.

With favorable government policies promoting electric vehicles, including the “863” program and “Ten Cities, Thousand Vehicles” initiative, Gotion rapidly ascended the market. By 2012, just six years after its establishment, Gotion topped the domestic power battery output rankings, outperforming then-nascent competitors like CATL and BYD. In 2015, it became the first power battery company listed on the A-share market and, by 2016, Li Zhen’s wealth had made him the richest person in Anhui province, with Gotion boasting a gross profit margin of 46.93%.

However, this period of prosperity ended abruptly in late 2016 when the Ministry of Industry and Information Technology set a subsidy threshold for battery energy density, favoring nickel-cobalt-manganese (NCM) batteries over LFP ones. Consequently, the market share of LFP batteries plummeted to below 15%, and Gotion’s net profit dropped from 1.031 billion yuan in 2016 to 149 million yuan in 2020. Meanwhile, CATL and BYD leveraged advanced technologies to dominate the market, leaving Gotion trailing behind.

By 2021, after several years of ups and downs, Gotion began to accelerate its recovery by inviting Volkswagen China as a major shareholder and aggressively expanding its capacity. As of the first half of this year, Gotion reported fixed assets of 28.72 billion yuan and ongoing construction projects totaling 17.86 billion yuan, bringing its total investment in capacity to 46.58 billion yuan. This represented a fivefold increase compared to the 8.31 billion yuan total fixed assets and construction investment in 2020.

Despite the substantial growth in capacity, Gotion’s debt has also escalated. As of the first half of this year, Gotion’s total liabilities reached 81.78 billion yuan, with a debt-to-asset ratio of 72.22%. In 2021, its total liabilities were only 24.24 billion yuan, with a debt-to-asset ratio of 55.58%. This increase in liabilities has led to increased pressure on Gotion’s financial stability. As of this year’s first half, Gotion reported current liabilities of 57.38 billion yuan, including short-term loans of 19.3 billion yuan and non-current liabilities due within a year of 8.277 billion yuan, totaling 27.577 billion yuan. However, Gotion’s cash reserves stood at only 15.46 billion yuan, insufficient to cover these debts.

Besides the debt and cash flow pressures, the risk of overcapacity looms large. Currently, Gotion has an effective production capacity of approximately 130 GWh, which is expected to rise to nearly 150 GWh by year-end. While Gotion’s market share has increased, reaching 3.6% globally and 5.18% domestically, the power battery market has entered an oversupply phase. SMM forecasts that global lithium-ion battery production capacity will climb to 5732 GWh by 2025, while demand remains relatively stagnant.

Gotion has already begun to show signs of overcapacity, with inventories rising to 9.756 billion yuan in the first half of this year, compared to 5.369 billion yuan in the same period last year. To mitigate the risk of overcapacity, Gotion has adopted a strategy of attracting customers through competitive pricing. Reports indicate that Gotion has successfully delivered production batteries for several models, including those from Chery and Geely. However, the gross profit margin for Gotion’s battery systems stands at 14.24%, significantly lower than CATL’s 22.41%, indicating that while Gotion’s business is expanding, its profitability remains a challenge.

Currently, Gotion’s major focus is on solid-state batteries. The recent 80 billion yuan investment in new lithium-ion battery manufacturing bases aims to enhance solid-state battery production capacity. Solid-state batteries are quickly becoming a pivotal direction in the industry, with the ultimate competition centered around research and development capabilities. In the first half of this year, Gotion’s R&D expenses surpassed 1 billion yuan, while CATL spent over 10 billion yuan, indicating that Gotion still has considerable ground to cover in its pursuit of industry leadership.