Can China’s fastest-growing firms save themselves from themselves?
A race for market share in China’s new-found growth sectors has led to vicious price spirals, eliciting warnings from high-level officials
Overnight, it seemed China’s power bank industry had run out of juice.
It started with a series of high-profile incidents this year, where certain versions of the portable charging stations burst into flames on flights. In late June, the country’s aviation regulator issued an emergency ban, preventing passengers from taking the devices onto flights if they did not meet certain safety standards.
As piles of discarded battery packs grew at airports around the country, several manufacturers announced they would be recalling their products, declaring more than one million units prone to overheating with repeated use.
Eventually, the problem was traced to its source: a battery cell supplier had relocated production to another factory, which had illegally substituted separator materials to cut costs.
The consequences of such a race to the bottom seem inevitable. While the average price of a Romoss power bank has dropped from 140 yuan to around 70 yuan (US$20 to US$10) in the past four years, the cost of a quality battery cell usually ranges from 40 yuan to 50 yuan. These shrinking profits, combined with fierce intra-industry competition, have forced many manufacturers into a position where they have no choice but to compromise quality.