Cui Dongshu: Policy driving promotes the continuous strengthening of plug-in hybrid vehicles. It is expected that the growth in demand for electric vehicle batteries will continue to be slower than the overall increase in vehicle sales.

On March 1st, Cui Dongshu, the Secretary-General of the China Passenger Car Association, stated in an article that the past two years have seen a high level of prosperity in the new energy vehicle and energy storage industries, leading to a rapid increase in the demand for batteries. The proportion of battery installation in new energy vehicles has decreased. As the conflict between Russia and Ukraine intensifies and the proportion of energy storage in new energy increases, the demand for energy storage has surged. Due to the soaring prices of nickel and cobalt, there has been a differentiation in growth between ternary lithium batteries and lithium iron phosphate batteries. The demand for lithium iron phosphate batteries has reached 68% of the total, becoming a recent growth hotspot. As the policy-driven plug-in hybrid continues to strengthen, the trend for pure electric vehicles weakens, and it is expected that the growth in battery installation demand for electric vehicles will continue to be slower than the total vehicle quantity growth. 1. Proportion of installed power batteries Currently, the proportion of installed power batteries in production has been decreasing. In 2020, the rate was 76%, in 2021 it was 70%, in 2022 it was 54%, and in 2023 it was 50%. The rapid growth in demand for batteries in industries such as energy storage, particularly due to the global energy crisis caused by the Russia-Ukraine conflict, has led to a significant decrease in the proportion of batteries being installed. Both power batteries and energy storage batteries are facing pressure from surplus production and inventory. In 2021 and 2022, the growth rate of power batteries was lower than that of the whole vehicle, but the low base in January 2024 led to a higher growth rate of power batteries, which was essentially on par with the overall vehicle growth rate. 2. Proportion of ternary batteries in domestic vehicle qualification certificates gradually recovering The demand growth for power battery installation is fluctuating. In 2019, the demand increased by 10%; in 2020, the power battery installation for domestic vehicles was 64GWh, with a 2% growth in demand; in 2021, the power battery installation was 155GWh, with a 143% demand growth; in 2022, it was 295GWh, with a 91% demand growth; and in 2023, it was 388GWh. In these figures, ternary batteries increased by 21% in 2019, decreased by 7% in 2020, increased by 91% in 2021, increased by 49% in 2022, and increased by 14% in January-December 2023. The growth of lithium iron phosphate batteries was significant, with a 2020 growth of 20%, a 2021 growth of 227%, a 2022 growth of 130%, and a 42% growth in January-December 2023. In 2022, the power battery installation was 295GWh, a 91% increase year-on-year. Of this, the installation of ternary batteries was 110GWh, a 49% increase year-on-year, while the installation of lithium iron phosphate batteries was 184GWh, a 130% increase year-on-year. In January 2023, the power battery installation was 388GWh, a 32% increase year-on-year. Of this, the installation of ternary batteries was 126GWh, a 14% increase year-on-year, and the installation of lithium iron phosphate batteries was 261GWh, a 42% increase year-on-year. In January 2024, the installation of ternary batteries was 12.6GWh, accounting for 39%, an increase of 6 percentage points, while the installation of lithium iron phosphate batteries was 19.7GWh, accounting for 61%, with an improvement in the growth of ternary batteries. 3. Continued strong growth in automobile battery demand The demand for passenger car batteries continues to be strong, with a 70% increase in battery demand for pure electric passenger cars in 2024, and a 193% increase in battery demand for plug-in hybrid passenger cars, showing sustained strong growth. The demand for batteries in buses is relatively sluggish, while the demand for batteries in special vehicles is growing relatively fast. From the perspective of battery installation proportion, the demand structure of power batteries has been rapidly changing in recent years. In 2020, pure electric passenger cars were still in first place, pure electric buses in second place, and pure electric special vehicles in third place, with plug-in hybrid passenger cars in fourth place. However, this year, pure electric passenger cars remain in first place, while plug-in hybrid passenger cars have risen to second place, pure electric special vehicles to third place, and pure electric buses have fallen to fourth place. In recent years, the market for pure electric buses has sharply declined, while plug-in hybrid passenger cars have shown a relatively rapid increase, and pure electric special vehicles have maintained a relatively stable feature with a battery usage rate of about 7-8%. Currently, the proportion of pure electric buses has decreased from 18.5% to a cumulative 1.1% by 2024, a decrease of 17 percentage points. The increase in battery usage for plug-in hybrid passenger cars has been relatively rapid, with the proportion rising from 7% to 23.9%, an increase of 17%, while pure electric vehicles have decreased by 0.6%, maintaining the absolute core characteristics of battery demand with passenger cars accounting for over 91%. 4. Vehicle production qualification certificate According to the calculation of the battery capacity in the qualification certificate, the production volume of qualified products in January 2024 was 714,000 units, a 105% increase year-on-year, with a 82% increase for pure electric passenger cars, and a 146% increase for plug-in hybrid passenger cars. Pure electric special vehicles increased by 194% year-on-year, showing strong production data. 5. Supporting battery companies are far from fully competitive In recent years, there has been no significant change in the competitive landscape of the battery market. Due to the relatively slow technological advancement in the power battery market and the significant feature of scale growth, battery companies have obtained strong characteristics of production and installation quantity growth. The original structure of batteries has not changed significantly. Whoever invests more gets a larger market share, leading to a continuous strong performance of major battery companies expanding. Meanwhile, medium and small battery companies have opportunities to achieve growth through technological breakthroughs or other means. Therefore, the battery landscape should be relatively stable amidst rapid growth. However, there are relatively large opportunities for changes in the battery industry in the future. It is increasingly evident that in the new energy system, the trend of vehicle manufacturers producing batteries or collaborating with related enterprises to produce batteries is becoming more pronounced, and battery companies will gradually form core supporting products for vehicles. Currently, there isn't a strong demand for high-end electric vehicle markets. Instead, there is a greater demand for small and micro cars for daily use, especially due to the impact of the pandemic, there is a high demand for A0 and A00 level cars. In terms of the supply chain, vehicle manufacturers will continue to strengthen their control over battery companies and the upstream industrial chain, while also enhancing their control over brand marketing capabilities downstream. Under the new energy system, the "vehicle is king" feature will continue to be reflected. 6. Decline in demand for lithium iron phosphate batteries.The energy density of mainstream batteries for pure electric vehicles currently ranges from 125 to 160. Particularly notable in January 2024 is the proportion of batteries in the 125-140 range reaching 42%, an increase of 11 percentage points compared to the previous year. In January 2024, the proportion of vehicles with an energy density of 160 or above is 16%, a significant decrease from 31% in 2020, mainly due to the decrease in energy density brought about by the substitution of lithium iron phosphate batteries with ternary ones. The proportion of products with an energy density below 125 has decreased from a high percentage in 2020 to 15% in 2023. The competition landscape of battery companies is dominated by Contemporary Amperex Technology and BYD Company Limited. The gap between the two companies is narrowing, with BYD Company Limited's share increasing from 15% in 2020 to 18.6%, a 4-percentage point increase, while Contemporary Amperex Technology's share has decreased by approximately 0.5 percentage points. Other battery companies are experiencing clear differentiation in their market shares. The top companies' convergence effect has slowed, with the top two companies holding a proportion of 72% in 2022, which has decreased to around 70% this year, leaving only around 30% for other companies. The product differentiation advantage of lithium iron phosphate batteries is significant, with BYD Company Limited having a dominant position. Eve Energy Co., Ltd., CALB, and Zhengfujing New Energy have shown noticeable improvements since 2022. Due to BYD Company Limited's comprehensive transition to lithium iron phosphate batteries, the advantage of ternary batteries for Contemporary Amperex Technology and the top three companies has become more apparent.