Soochow: Domestic electric car sales in August are impressive plus overseas stockpiles are breaking out, and the industry chain's peak season continues.

Soochow released a research report stating that in terms of electric vehicles, domestic electric vehicle sales in August were impressive, with annual growth expected to be maintained at around 25%. Sales growth in Europe, America, and other regions continued to be weak. Overseas energy storage demand is booming, production remains strong during the peak season, and it is expected that the prosperity will continue until November. The bank stated that upstream lithium carbonate prices fell more than expected, while midstream continued to bottom out and accelerate capacity clearance. The bank is optimistic about the stable competitive landscape, clear profit advantage, and investment opportunities in the energy storage sector. Key points from Soochow's report are as follows: In August, domestic electric vehicle sales were impressive, with annual growth expected to be maintained at around 25%, while sales growth in Europe, America, and other regions continued to be weak. In August, domestic sales reached 1.1 million units, with a year-on-year increase of 30% and a month-on-month increase of 11%. The penetration rate was 45%, with a month-on-month increase of 12.1%/1.0%. The performance was impressive, with sales of pure electric vehicles such as Tesla and Geely Haoyue doing well, increasing their market share by 3 percentage points. In August, exports of electric vehicles reached 110,000 units, with a month-on-month increase of 22%/6%, totaling 820,000 units, an increase of 13%. The annual sales are expected to grow by 20% to 1.4 million units. From January to August, domestic electric vehicle sales reached 7.04 million units, a year-on-year increase of 31%, with a conservative expectation of 11.85 million units for the whole year, a growth of 25%. In August, mainstream European countries sold 126,000 units, with a month-on-month decrease of 39%/20%, mainly due to Germany's high installation base in August 2023, with a penetration rate of 23%, a month-on-month decrease of 8%/3%, and sales in 2024 are expected to remain stable at 2.9 million units. In the United States, sales in August were 148,000 units, with a month-on-month increase of 13%/17%, a penetration rate of 10.4%, a month-on-month increase of 0.5%, and annual sales in 2024 are expected to increase by 12% to 1.64 million units. Global electric vehicle sales are expected to increase by around 20% in 2024, slightly slowing to 15% in 2025, and with the introduction of overseas models in 2026, the growth rate is expected to recover to 20%. Energy storage has driven the industry, with significant production growth expected in September, and the industry's quarter-on-quarter growth of 10-20% is expected to continue until November. September's industry outlook remains strong, primarily driven by overseas energy storage. The demand for energy storage in Europe and emerging markets is surging, with large orders landing in the third quarter, including 7.8 GWh from Sunlight Middle East and 3 GWh from BYD Company Limited's project in Chile, coupled with early stocking for the 24H2 tariff increase in the US in 2026, with demand expected to reach 150/215/284 GWh in 2024-2026, an increase of 103%/43%/32%. Battery production in September was better than materials, with significant differentiation in materials, where separator leaders' production in September was stable, and iron lithium and electrolyte increased by 5%-10% month-on-month. The industry is expected to grow by 10-20% in the third quarter, and the industry's prosperity is expected to continue until November. Unit profitability for battery companies is expected to remain relatively stable in Q2-Q3, with bottoming out for iron lithium, electrolyte, and negative electrodes, while structural components are expected to see a slight decline in unit profitability. Since Q2, iron lithium, electrolyte hexafluoride, copper foil, and some auxiliary materials have all experienced losses except for industry leaders, with bottoming out gradually and structural components showing stable unit profitability in Q2. The impact of price cuts in Q3 is expected to cause a slight decline in unit profitability. The cost advantage of lead players in negative electrodes is significant since Q3, with an increase in the proportion of low-end products expected to lead to a small decline in unit profitability. Pre-cursor materials are expected to rebound due to nickel price increases, and battery leaders, relying on customer structure and cost advantages, are expected to have better profit margins than second-tier players. Investment recommendation: Optimistic about stable competitive landscape, clear profit advantage, and investment opportunities in the energy storage sector, with Contemporary Amperex Technology and BYD Company Limited as top picks, followed by Eve Energy Co.,Ltd., Shenzhen Kedali Industry, Hunan Yuneng New Energy Battery Material, and Shijiazhuang Shangtai Technology. Also recommended are Shenzhen Capchem Technology, Shanghai Putailai New Energy Technology, Guangzhou Tinci Materials Technology, CNGR Advanced Material, Jiangsu Cnano Technology Co.,Ltd., Zhejiang Huayou Cobalt, Ningbo Ronbay New Energy Technology, Beijing Easpring Material Technology, Yongxing Special Materials Technology, Sinomine Resource Group, Ganfeng Lithium Group, Tianqi Lithium Corporation, Shenzhen VMAX New Energy, Yunnan Energy New Material, Shenzhen Senior Technology Material, Shenzhen Dynanonic, Shenzhen Manst Technology, and others. Risk warning: Price competition exceeding market expectations, fluctuations in raw material prices, and a decline in investment growth.