U Power Limited (NASDAQ: UCAR) successfully listed on the US NASDAQ on April 20, 2023. The company is a leading enterprise in the comprehensive battery power solutions market. By establishing a complete automotive sales channel through its automotive procurement services, the company has gradually expanded its product portfolio for new energy vehicle battery power solutions, providing services across the entire automotive industry chain including battery services, battery swapping services, sales, automotive finance, maintenance, and scenario services. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for U Power Limited's listing and hereby warmly congratulates it on its successful listing.
U Power Limited (hereinafter referred to as 'U Power') was successfully listed on April 20, 2023. The company plans to issue 2,416,667 common shares at an issue price of $6.00 each, raising a total of $14.5 million.
During the process of listing in the US, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business, and other important chapters), helping the issuer communicate with the SEC and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and providing feedback on various SEC issues related to the industry for the issuer.
Investment highlights
The company is a leading provider of comprehensive battery power solutions in China;
The company continuously develops an automotive procurement network with industry influence and leads the development of the industry;
The company possesses industry-leading UOTTA battery swapping technology;
The company collaborates closely with leading Chinese automakers and battery developers;
The company has a visionary and experienced management team.
Overview of China's New Energy Vehicle Market
New energy vehicles use electric motors instead of internal combustion engines to drive the vehicle. New energy vehicles include plug-in hybrid electric vehicles, pure electric vehicles, extended-range electric vehicles, and other vehicles mainly powered by electricity. New energy vehicles can also be classified into new energy passenger vehicles and new energy commercial vehicles based on their purpose.
According to a Frost & Sullivan report, the sales volume of new energy vehicles in China increased from 507,000 units in 2016 to 1.366 million units in 2020, with a compound annual growth rate of 28.1%. Meanwhile, the sales volume of new energy passenger vehicles in China increased from 336,000 units in 2016 to 1.246 million units in 2020, with a compound annual growth rate of 38.8%. New energy passenger vehicles dominate the new energy vehicle market in China, accounting for 91.2% of the total market volume in 2020. It is expected that the proportion of new energy passenger vehicles will grow to 96.1% of the total market by 2026. The sales volume of new energy passenger vehicles is also expected to increase from 3.334 million units in 2021 to 10.609 million units in 2026. Due to the subsidy adjustment for commercial new energy vehicles in 2018, the growth of commercial new energy vehicles has been relatively slow compared to new energy passenger vehicles.
However, as stated in the 'New Energy Vehicle Industry Development Plan (2021-2035)' released by the General Office of the State Council, the Chinese government plans to focus on promoting new energy for commercial vehicles in the coming years. With the improvement of charging infrastructure, it is expected that the sales volume of commercial new energy vehicles will increase from 165,000 units in 2021 to 431,000 units in 2026, with an annual compound growth rate of 21.2% during this period.
New Energy Vehicle Sales in China (by Use)
Forecast from 2016 to 2026
Source: Frost & Sullivan report
Overview of the New Energy Vehicle Market for Commercial Use in China
New energy vehicles for commercial use refer to those used in commercial and operational scenarios, mainly engaged in profit-making road transportation activities such as online car-hailing, taxis, trucks, buses, vans, long-distance vehicles, shared or leased vehicles. According to a Frost & Sullivan report, the electrification of taxis is on the rise, and domestic cities such as Beijing, Shenzhen, and Taiyuan have been promoting the full electrification of taxis in recent years.
New energy vehicles have a significant competitive advantage in areas such as environmental protection and intelligent travel by utilizing smart technologies. New energy taxis are major participants in the market for battery swapping solutions for commercial new energy vehicles. The number of new energy taxis in China increased from 30,000 units in 2016 to 90,000 units in 2020, with a compound annual growth rate of 31.6% from 2016 to 2020.
Since 2016, driven by policies, local governments in different cities in China have issued relevant regulations, and more than 20 cities in China have begun to promote the replacement of diesel taxis with new energy taxis. In recent years, the electrification development of taxis in our country has been rapid, and the new energy taxi market is expected to grow further. It is estimated that by 2026, the number of new energy taxis in use will reach 575,000, while the proportion of new energy taxis in the total taxi fleet will reach 40.8%.
The ownership and penetration rate of new energy taxis in China
Forecast from 2016 to 2026
Source: Frost & Sullivan report
New energy vehicles for commercial use in China
Battery swapping solution market
Industry Overview
The commercial new energy vehicle battery swapping solution refers to the battery swapping services provided by battery swapping operators for commercial use, as well as other related value-added services. Among them, Battery-as-a-Service (BaaS), which involves separating the vehicle from the battery, is the mainstream business model in the battery swapping solution market. New energy vehicle owners usually lease batteries from battery asset operators, who are responsible for the daily operation and maintenance of the new energy vehicle batteries, full lifecycle management, cascading utilization, and energy storage services. BaaS provides another attractive solution in the battery exchange industry because it reduces the high upfront cost of electric vehicles by separating the ownership of the battery. BaaS also enables battery asset operators to closely monitor battery performance and carry out professional lifecycle management.
According to a Frost & Sullivan report, the revenue scale of new energy vehicle battery swapping solutions for commercial use in China reached approximately 2.18 billion yuan in 2020. With the increasing penetration rate of new energy vehicles for commercial use, the growth in vehicle usage, and the continuous expansion of battery swapping infrastructure networks, the revenue scale of new energy vehicle battery swapping solutions for commercial use in China is expected to grow from approximately 8.66 billion yuan in 2021 to 176.62 billion yuan by 2026, with a compound annual growth rate of 82.8%. Among them, the revenue scale of electric ride-hailing vehicle battery swapping solutions for the period from 2021 to 2026 is expected to grow at an annual compound growth rate of 88.1%, the fastest-growing segment among all sub-markets, followed by electric trucks with a compound annual growth rate of 85.1%.
Market scale of battery swapping solutions for new energy vehicles for commercial use in China
(in terms of revenue)
Forecast from 2019 to 2026
Source: Frost & Sullivan report
Market development trends and driving factors
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The energy replenishment time for new energy vehicles is constantly shortening
The battery swapping solution has reduced the average refueling time for new energy vehicles from 1-10 hours to less than 5 minutes. In recent years, the sales of new energy vehicles in China have increased significantly, however, the development of charging facilities for new energy vehicles still cannot meet the current growing demand for refueling. This is mainly due to development obstacles such as a lack of charging infrastructure and difficulties in grid construction. Compared with charging, the average battery swapping process only takes a few minutes. In addition, it can better utilize the price difference between peak and off-peak hours to reduce operating costs, and centralized monitoring of power station batteries can also extend battery life. Therefore, the battery swapping solution has addressed some core pain points in the development of the new energy vehicle industry, especially for commercial new energy vehicles such as taxis and ride-hailing cars that require frequent charging.
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New energy vehicles for commercial use are more suitable for battery swapping
The operation hours and routes of new energy vehicles for commercial use are relatively stable, making it easier to set up battery swapping stations for such vehicles. For example, new energy heavy trucks are expected to become the primary downstream application in the battery swapping solution market. There are many transportation ports in China that require heavy trucks for cargo transport. According to a Frost & Sullivan report, eight of the world's busiest ports are located on the Chinese mainland. Port application scenarios have relatively enclosed and fixed routes, with stable transportation demand. Therefore, heavy trucks using battery swapping mode are more economical and efficient. Due to the relatively high price of trucks, car owners tend to use BaaS plus battery swapping solutions, which will effectively reduce the initial purchase cost of new vehicles due to battery separation.
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The Chinese government has continuously introduced policies and regulations to promote the development of the battery swapping solution market
According to the overall 'dual carbon' goal proposed by our country, green travel has become an inevitable trend. In 2020, the Ministry of Industry and Information Technology held a symposium proposing to actively promote the application and implementation of new energy vehicle battery swapping solutions. In May 2021, the Ministry of Industry and Information Technology issued the 'Safety Requirements for Electric Vehicle Battery Swapping', addressing the lack of standards in the battery swapping solution industry and proposing safety requirements, testing methods, and inspection rules for new energy vehicle battery swapping. These requirements help guide the development of new energy battery swapping products, enhance the safety of new energy vehicle battery swapping solutions in car companies, and support the high-quality development of the new energy vehicle industry. These policies provide continuous support for the expansion of China's new energy vehicle battery swapping solution industry.
Competitive landscape of China's battery swapping solution market
Battery swapping solution providers include new energy vehicle manufacturers and independent third-party battery swapping operators. New energy vehicle manufacturers mainly serve their own battery swapping models, while independent third-party battery swapping operators provide battery swapping services for various cooperative new energy vehicle manufacturers. With the development of battery swapping technology, the widespread layout of battery swapping infrastructure, and the continuous introduction of supportive policies, it is expected that more players will enter the Chinese battery swapping solution market in the near future.
Yopin Auto's business model has a leading edge within the industry. The company uses batteries as a carrier, providing a range of related battery services such as charging pile operation, battery banking services, and battery replacement services. Focusing on the entire lifecycle of automobiles, the company's business covers battery services, battery swapping services, sales, finance, maintenance, scenario services, and other full industrial chain automotive services. Starting from automobile transactions, the company locks in customers through comprehensive services, keeping them within its own ecosystem.
Overview of China's Automotive Procurement Market
Automobile procurement service providers work directly with vehicle manufacturers, wholesalers, dealers, and individual customers. They can also cooperate with new energy vehicle brands to sell related models in their own physical stores. Compared to traditional 4S stores, automobile procurement service providers can acquire the sales rights for multiple car brands with less investment.
Currently, the sales network expansion of Chinese new energy vehicle manufacturers is mainly concentrated in first- and second-tier cities. Most new energy vehicle manufacturers adopt self-built sales networks and direct sales models. Without the support of dealerships, new energy vehicle manufacturers may find it difficult to establish offline sales channels in third- and fourth-tier cities. Therefore, the penetration rate of new energy vehicles in China's third- and fourth-tier cities remains low. Vehicle procurement service providers have cost-effectiveness through their distribution model. In addition, vehicle procurement service providers can greatly improve the accessibility and quality of vehicle value-added services by providing value-added services through cooperation with local enterprises.
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Frost & Sullivan has extensive research experience in the automotive and transportation industries, assisting well-known companies in successfully listing on capital markets. Successful listings include: HSAI.NASDAQ (Heilongjiang Sany Heavy Industry Co., Ltd.), ECX.NASDAQ (Epic Technology Group Co., Ltd.), 2457.HK (Buyang International Holdings Limited), NWTN.NASDAQ (New Town Group Holdings Limited), 3931.HK (Zhongxin New Energy Co., Ltd.), 9863.HK (Leapmotor Co., Ltd.), 2418.HK (Deutsche Bank Securities Co., Ltd.), 2246.HK (KuaiDog Taxi Co., Ltd.), NIO.SGX (NIO Inc.), 9866.HK (NIO Inc.), 2169.HK (Canggang Railway Co., Ltd.), YGMZ.NASDAQ (Yanjiang Mingzhu Co., Ltd.), 8620.HK (Asia Express Co., Ltd.), 1442.HK (InfinityL&T), 6928.HK (TOMOHOLDINGS), EH.NASDAQ (Ehang Intelligent Technology Co., Ltd.), 8418.HK (Aodima Group Co., Ltd.), 8157.HK (Xiangxing International Holdings Limited), 1839.HK (CIMC Vehicle Co., Ltd.), 1930.HK (Xunlong Co., Ltd.), 3877.HK (CSSC Leasing Co., Ltd.), 1785.HK (Chengdu Expressway Co., Ltd.), 6162.HK (Tianrui Auto Interior Co., Ltd.), 2885.HK (Beping Holdings Co., Ltd.), 2258.HK (Huazi International Holdings Limited), 1809.HK (Pulin Chengshan Co., Ltd.), NIO.NYSE (NIO Inc.), 8482.HK (Wanli Da Co., Ltd.), 1576.HK (Qilu Expressway Co., Ltd.), 1760.HK (InnoTech Co., Ltd.), 1737.HK (Asia Industry Co., Ltd.), 2025.HK (RuiFeng Power Co., Ltd.), 8065.HK (Gaomeng Technology Co., Ltd.), 1596.HK (Hebei Yichen Co., Ltd.), 8283.HK (Zhengli Holdings Co., Ltd.), 8035.HK (Junao Holdings Co., Ltd.), 1585.HK (Yade Group Co., Ltd.), EHIC.NYSE (Yihai Car Rental Co., Ltd.), 1148.HK (Xincheng Power Co., Ltd.), ZX.NYSE (Zhengxing Wheels Co., Ltd.), 1241.HK (Shuanghua Holdings Co., Ltd.), 1039.HK (Changfeng Axle Co., Ltd.).
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