Recently, there have been frequent orders from first and second tier battery companies.

Ningde Times, BYD, Zhongchuangxin Aviation, Yiwei Lithium Energy, Xinwangda, and Haichen Energy Storage have signed new cooperation agreements in various fields such as new energy vehicles, energy storage, two wheeled vehicles, and electric ships. The demand for comprehensive electrification has emerged, and the comprehensive electrification strategy is gradually becoming an industry consensus, creating new growth for battery enterprises.

At the beginning of the third quarter, corresponding to the off-season at the end of the third quarter, the order heat showed a market trend of "not being weak in the off-season", linking with the overall recovery of the lithium battery industry chain.

According to the production data of lithium battery materials in July, the production of electrolyte, negative electrode, and separator increased by nearly 30% month on month. However, in terms of positive electrode materials, the market situation for positive electrode materials is relatively weak due to the continuous decline in lithium carbonate prices.

Battery Enterprise Order Heat

In the field of energy storage, Haichen Energy Storage has signed a cooperation agreement with Jupiter Power in the United States, which will deliver and deploy a 3GWh battery energy storage system by the end of 2025; Ningde Times reached a key cooperation in energy storage business with two overseas companies at the European Battery Exhibition; Yiwei Lithium Energy (subsidiary Yiwei Energy) has signed a memorandum of understanding with American energy storage system integrator Powin to establish the main terms and conditions for the supply of lithium iron phosphate battery packs and higher energy density batteries.

In the field of new energy vehicles, the batch order delivery and official operation of pure electric mixer trucks jointly developed by China Innovation Aviation, XCMG Automobile, and XCMG Shiweiying. Xinwangda (subsidiary Xinwangda Power) has won the battery fixed-point project for the Ideal M8, M7, and Xiaomi's third model.

In the field of electric motorcycles and two wheeled vehicles, Funeng Technology has signed a strategic cooperation agreement with Southeast Asian battery swapping operators and Indian new energy companies to expand the electric motorcycle and two wheeled vehicle swapping markets in Southeast Asia and South Asia. BYD has reached a cooperation agreement with Ampersand, an African electric vehicle and new energy technology company, to become its main battery supplier. It plans to produce approximately 40000 electric motorcycles and will achieve electrification of 30 million motorcycles in the long term.

In addition, the field of ship electrification has also emerged, and multiple international large commercial ships of China Innovation Airlines will be launched for trial with their battery products.

The frequent dynamic of orders indirectly confirms the mainstream view in the industry that the lithium battery industry chain has a clear foundation and needs to be repaired.

The difference is that this round of order boom is no longer focused on a single field, showing the characteristics of multiple fields including new energy vehicles, energy storage, two wheeled vehicles, and electric ships, and the emergence of comprehensive electrification demand.

Comprehensive electrification drives incremental growth

Energy storage is the most important increment. Taking Ningde Times as an example, in 2023, the energy storage sector contributed 14.9% to the total revenue, with a year-on-year increase of 1.3 pct in total revenue. The growth rate of energy storage revenue was 33.2%. Yiwei Lithium Energy, which is also vigorously developing its energy storage business, contributed 33.5% of its total revenue to the energy storage sector in 2023.

Especially driven by the transformation of overseas energy, the demand for Chinese energy storage cells from overseas has maintained a high growth rate. In the tariff policies of Europe and America, compared to power batteries and lithium battery materials, the impact of tariffs on energy storage cells is also the smallest. Battery companies are also accelerating their overseas expansion through the energy storage sector.

Loose binding on the new energy vehicle end. As for the installation and matching of power batteries in May, although the domestic power battery industry's second tier pattern has not changed, the growth rate of installed capacity in second tier and below power battery enterprises is strong, and the strategy of expanding market share for new energy vehicles is also effective.

The high growth rate of comprehensive electrification of new energy vehicles is in stark contrast.

The sea, land, and air electrification strategy has become a consensus among battery companies. The top 10 domestic power battery companies have all released lithium battery products for all sea, land, and air scenarios. Since the beginning of this year, orders in specific fields have gradually increased, especially in the fields of two wheeled vehicles, electric ships, and commercial vehicles.

In terms of electrification penetration rate, in the commercial vehicle market such as road passenger transportation, urban distribution, heavy-duty transportation, and construction machinery, electrification penetration rate is rapid in land transportation, but it is still less than one-third. In the growing markets of electric ships and eVTOL, there is also a demand for more convenient energy replenishment.

In terms of profit margin, it is reported that electric ships and commercial vehicles are more sensitive to the cost of battery cells. However, in high-end electric motorcycles and eVTOL power battery systems, the profit margin is relatively large. Under the premise of high overall vehicle (whole machine) cost, the power system accounts for 30% and 10% of the overall vehicle (whole machine) cost, respectively.

Under the background of comprehensive electrification, with the optimization of the subsequent supply and demand pattern, the profit margin of each link in the lithium battery industry chain is expected to rebound.

The overall recovery of the lithium battery industry chain

In addition to the signal of hot orders, the previous rebound in production scheduling, capacity utilization, and operating rates of lithium batteries and lithium battery materials also confirms the recovery of the industry chain market.

In terms of production scheduling data, the production of lithium batteries in July remained basically unchanged compared to the previous month, with a high momentum during the off-season period. In particular, the production of electrolytes, negative electrodes, and separators increased by nearly 30% compared to the previous month.

It is worth noting that the prices of various links in the lithium battery industry chain have not yet rebounded.

On the one hand, each link is still in a state of absorption and repair. Especially in the process of consuming negative electrode materials and lithium iron phosphate materials with high pressure, the top enterprises are currently almost fully loaded, but there is still room for capacity utilization in the waist and tail enterprises.

Another major influencing factor is the price fluctuation of lithium carbonate. The price of lithium carbonate remained in a downward trend in June, and on June 25th, the price of battery grade lithium carbonate reached 91600 yuan/ton. Meanwhile, the inventory of lithium carbonate exceeded 100000 tons, reaching a historic high. In terms of futures prices, the main contract for lithium carbonate, LC2407, closed at 86900 yuan/ton on June 25th, falling below 90000 yuan/ton, exacerbating the supply-demand contradiction of lithium carbonate.

Overall, the diaphragm and electrolyte are nearing the end of destocking, and the need for repair is expected to be the first to respond. The prices of negative electrodes and separators are gradually stabilizing. The positive electrode material has been affected by fluctuations in lithium prices and continues to operate weakly, ushering in a new round of price competition.