China’s Auto Makers are Revolutionizing Automotive Manufacturing

This article introduces the paper "China's Auto Makers are Revolutionizing Automotive Manufacturing" published by Horizon Insights Inc in April 2022.

Tesla’s new integrated die-casting technology simplifies complicatedmanufacturingprocess, shortens production cycle, and reduces manufacturing costs byat least20%
Tesla’s new integrated die-casting technology simplifies complicatedmanufacturingprocess, shortens production cycle, and reduces manufacturing costs byat least20%
Integrated one piece die casting technology of rear chassis is mature
Integrated one piece die casting technology of rear chassis is mature

Investment Thesis: Revolutionizing Automotive Manufacturing

The automotive industry is undergoing a significant transformation with the adoption of new integrated one-piece die casting technology using heat-free alloy casting materials. Here's a breakdown of the key investment theses:

  • Emerging Technology: While still in early stages, integrated one-piece die casting is expected to become mainstream. Domestic enterprises like L.K. Technology (0558.HK), Lizhong (300428.SZ), and Wencan (603348.SH) are poised to benefit due to their existing technological advantages.
  • Cost Reduction: This technology significantly reduces car production costs. Automakers are increasingly adopting it as the range of integratable auto body parts expands.
  • Tesla's Implementation: In 2020, Tesla pioneered the use of this technology by die-casting the rear chassis (base frame) of its Model Y, integrating over 70 parts into a single piece. This resulted in a 40-50% reduction in manufacturing costs.
  • Future Potential: Beyond the rear chassis, other car body parts like the front cabin frame, battery tray, and other components could be integrated. The ultimate goal is to manufacture the entire vehicle using just 3-4 ultra-large structural body parts.
  • Domestic Automakers: Automakers such as NIO, Xpeng, and Li Auto are expected to launch new cars using this technology in the second half of 2022.
  • Demand for Ultra-Large Die Casting Machines: The demand for lightweight body frames is driving explosive growth in the market for ultra-large die-casting machines. From 2015-2020, China's die-casting machine production grew at about 20% annually. After 2020, the growth is expected to exceed 50% annually from 2022-2025.
L.K. Technology: expected to maintain at least a 30%year-on-year salesgrowth in 2022 and 2023
L.K. Technology: expected to maintain at least a 30%year-on-year salesgrowth in 2022 and 2023
Xusheng: 86% revenue growth and 24% profit growth in 2021, but risingshippingcosts as well as higher raw material costs have led to a lower grossmargin
Xusheng: 86% revenue growth and 24% profit growth in 2021, but risingshippingcosts as well as higher raw material costs have led to a lower grossmargin

Key Players and Technological Barriers

  • L.K. Technology (0558.HK) dominates the domestic ultra-large die-casting machine market with over 80% market share due to its technological first-mover advantage. Competitors include Buhler, Yizumi, and Haitian Metal.
  • Heat-Free Casting Materials: A major technological barrier has been the development of heat-free casting materials. Lizhong Group and others have developed such materials to break the overseas monopoly. Tesla initially used imported materials in its Model Y. Now, companies like Lizhong, Wencan, and NIO are using independently and domestically developed heat-free alloys.
  • Traditional vs. New Technology: Traditional die-casted frames require heat treatment, which can lead to deformation and surface defects. The new heat-free manufacturing technology overcomes these problems.
  • Integration of Die-Casting Factories:
    • Substantial equipment investment capital
    • Mold manufacturing know-how
    • New heat-free die-casting technology
    • Upstream and downstream industry logistics
      As an intermediate link, the main entry barriers for die casting factories are the equipment investment and mold manufacturing technology.

Benefits of New Die Casting Technology

The new innovations in die casting technology and manufacturing process are expected to:

  1. Improve car production efficiency
  2. Lower car manufacturing cost
  3. Lower carbon emissions during production
  4. Shorten production cycle
  5. Simplify complex manufacturing processes
  6. Reduce deformations and surface defects
  7. Reduce a car's body weight
  8. Reduce energy consumption and improve cars' mileage range

Tesla's Implementation in Detail

Tesla's integrated die-casting technology simplifies production, shortens the cycle, and reduces manufacturing costs by at least 20%.

  • Integration: Tesla integrates over 70 parts of the rear chassis into one piece. Previously, the traditional process was mainly used for spare parts like engine blocks and transmission boxes.
  • Model Y Production: 79 parts of the Model Y's rear chassis were integrated into 1 to 2 large frame structures. The North American plant uses two 4,000-ton die-casting machines, while the Shanghai plant uses one 6,000-ton machine.
  • Cost Reduction: Integrated die-casting reduces costs by lowering production time, decreasing production line investment, and reducing material costs. Official data suggests a 40-50% cost reduction, with actual reduction around 20-30% at volume production. Furthermore, the use of aluminum alloys reduces body weight by 5-10%, improving electric car mileage.

Table: Tesla's Model Y Cost Reduction Factors

TeslaCost Reduction Factors
ProductionProduction time of 2 hours for the base plate after conventional stamping and welding, and 2 minutes for one-piece die-casting
Production Line InvestmentTraditional welding line requires more than 300 welding robots, integration technology reduces it by 1/3
Material ChangesTesla die casting weighs 60-65Kg, about 5% less than the traditional

Acceleration of Integrated Die Casting in 2021

Integrated one-piece die-casting manufacturing of body frame structures began to accelerate in 2021 due to technology maturation.

Table: Domestic Brands of Die Casting Machine Clamping Force Upgrades

EquipmentPrevious Clamping ForceCurrent Maximum Clamping Force
L.K. Technology6000 tons12,000 tons
Izumi3500 tons7000 tons
Haitian Metal4000 tons8800 tons

Table: Development of Domestic Heat Treatment-Free Materials

CompanyHeat-Free Material Situation
Lizhong GroupIn 2020, Lizhong Group obtained the national invention patent certificate. The elongation rate is more than 5 times higher than the traditional die-casting material, and the price can be 15-20% less than similar foreign materials.
Guangdong HongjinEstablished in March 2009, a wholly owned subsidiary of Huajin Aluminum
  • Maturity & Market Growth: The maturity of the die-casting process is driving the acceleration. Major market growth factors include: breakthroughs in die-casting machine clamping force, availability of heat treatment-free materials for localization, and advancements in integrated die casting-mold manufacturing.
  • New Automakers Leading: New automakers such as Xpeng, NIO, and Li Auto are working with contracted integrated die-casting factories and are expected to launch new car models in the second half of 2022. Traditional automakers like BYD, Geely, and FAW are catching up with R&D and testing, with mass production expected within 3 years.
  • Integration Objectives: The final objective of integrated one-piece die-casting manufacturing process is to integrate the more than 370 auto parts into 3-4 structural body parts: rear base-floor frame (rear chassis), front cabin frame, rest of body frame, and battery tray.

Explosive Market Demand and Industry Overview

The industry chain includes:
*Die Casting Machine
*Material suppliers
*Mold Factory
*Die Casting Plant
*Automakers

Table: Domestic Super-Large Die-Casting Machine Order Situation

CompanyEquipment VolumeMachine Source
Tuopu Group6 sets of 7200 tons, 10 sets of 4500 tons, 5 sets of 2000 tonsL.K. Technology
IKDTotal 45 units, 35 units above 1000 tons, 4 units of 4400 tons, 2 units of 6100 tons, 2 units of 8400 tonsBühler
Wencan Co.2 sets of 6000 tons, 3 sets of 4500 tons, 1 set of 3500 tons, 1 set of 2800 tonsL.K. Technology
Guangdong Hongtu1 unit 6,800 tons, 2 units 12,000 tonsL.K. Technology
Xusheng1 x 4400 tonsL.K. Technology
CHERVON Auto2 sets of 2,700 tons, 3,000 tons, 4,200 tons, 4,400 tons, 6,000 tons and 8,000 tons eachL.K. Technology
TeslaShanghai plant 3 units of 6000 tons, North America plans to purchase 8000 tonsL.K. Technology
VolvoSwedish plant introduces more than 8,000 tonsBühler/L.K. Tech
Millison4 units of 8,800 tons, 1 unit installed for testingHaitian Metal

Table: Estimated Prices of Each Brand of Die-Casting Machine (in yuan)

Clamping ForceL.K. TechnologyYizumiHaitian MetalBühler
1000 tonsAround 5 millionAround 5 millionAround 5 millionAround 7 million
3000 tonsAround 18 millionAround 18 millionAround 18 millionAround 25 million
6000 tonsAround 40 million--Around 60 million

Table: Mold Price and Material Price

CategoryPrice
6000 tons moldThe price of a single set of molds is around 10 million yuan
Heat treatment-free aluminum alloy15-20% higher price than traditional aluminum alloy

Only high-volume production, exceeding 22,000 units, benefits from cost reduction.

Market Potential and Forecast

The ultra-large die-casting machine market may undergo phenomenal growth in the next 5 years.

Table: Market Forecast for the Next 5 Years

Estimated Total Sales Volume of Passenger CarsIntegrated New Tech ModelsIntegrated New Tech Penetration Rate EstimationStructural Parts for Integrated New TechNumber of New Integrated Die-Casting VehiclesDemand for New Die-Casting Machines
25 million21.75 million30%Rear soleplate and front hatch frame6.52 millionAbout 250 units
25 million21.75 million50%Rear soleplate and front hatch frame10.87 millionAbout 400 units
25 million21.75 million70%Rear soleplate and front hatch frame15.22 millionAbout 550 units

L.K. Technology: Market Leader

L.K. Technology's super large die casting machine has proven track records in the domestic market as it is the supplier of Tesla's 6000 tons machine used for Model Y

Table: Machine Features by Category

Machine CategoryL.K. TechnologyYizumiHaitian MetalBühler
FeaturesWithin the three plate, dynamic plate, static plate, and back plate segments, L.K. Tech's super large tonnage models are market proven products, Adopting Siemens' hydraulic system, Developing 12,000 tonsDeveloping of 7000 tonsBosch hydraulic system, Delivery of 8,800 tonsTwo-plate machine & small and medium tonnage are reliable, 8400, 9200 tons

Aluminum Alloy Casting Material Using Heat-Free Technology

Car parts manufactured by Integrated one piece die casting are usually large in size, thin walled, have complex
structure, easily deformed, and therefore, heat-treatment-free materials and high vacuum die-casting process
manufacturing are required.

Table: Global progress in the development of heat treatment-free materials

CompanyProductsPartner companiesProgress
TeslaSelf-developedTeslaProduct Phase
Lizhong GroupSelf-developedWencan Co.Obtained a patent
Guangdong HongjinSelf-developedGuangdong HongtuSample
CSMET GroupAgentTeslaProduct Phase
AlcoaEZCASTProduct Phase
Rheinland, GermanyCastasil-37Product Phase

Table: Estimated demand for heat-treatment-free materials

Estimated total sales volume of passenger carsIntegrated new tech modelsIntegrated new tech penetration rate estimationNumber of new integrated die-casting vehiclesRear floor and front hatch material requirementsFour structural parts material requirements
25 million21.75 million30%6.52 million782,000 tons2.2 million tons
25 million21.75 million50%10.87 million1,304,000 tons3.7 million tons
25 million21.75 million70%15.22 million1.806 million tons5.175 million tons

Table: Business, Current Capacity and Future expansion plans

BusinessCurrent capacityFuture expansion plans
Aluminum alloy casting1.5 million tons/year420,000 tons
Aluminum alloy wheels18.45 million pcs/year4.6 million pieces
Intermediate aluminum alloy70,000 tons/year35,000 tons

New integrated die-casting technology will become mainstream

Fixed asset investment: number of large and super large die-casting machines, plant
investment, etc.

Mold manufacturing capacity: few domestic die-casting factories have more than 6000 tons
of ultra-large mold production capacity

Die casting technology: product qualification rate, sustainable production (start-up rate),
technician training system, etc.