Cui Dongshu: Price reduction drives the continuous increase of the proportion of lithium iron phosphate batteries.

In October 2024, Cui Dongshu, Secretary General of the China Passenger Car Association, released the "Analysis of the Market for Lithium-ion Batteries for New Energy Vehicles - October 2024". The installation of lithium-ion batteries in October 2024 was 59.2Wh, a year-on-year increase of 51%; the installation of ternary batteries was 12.2GWh, a year-on-year decrease of 1%, accounting for 21%, which was lower than the same period; while the installation of lithium iron phosphate batteries was 47GWh, a year-on-year increase of 75%, accounting for 79%; the growth of ternary batteries has slowed down. From January to October, the installation of lithium-ion batteries was 406G, an increase of 38% year-on-year. Cui Dongshu analyzed that due to the high prices of nickel and cobalt, there is differentiated growth between ternary lithium batteries and lithium iron phosphate batteries. With the growth of long-range products, ternary batteries still have a market, and the declining price is driving the proportion of lithium iron phosphate batteries up. Cui Dongshu stated that the competitive landscape of battery companies is characterized by the relative strength of Contemporary Amperex Technology and BYD Company Limited. Currently, there is still a considerable gap between BYD Company Limited and Contemporary Amperex Technology, with BYD Company Limited's market share rising from 15% in 2020 to 25% in 2024, and reaching 26.9% in October; while Contemporary Amperex Technology's market share in October dropped to 43%, and the market share of other battery companies also showed a clear differentiation trend. The concentration effect of top battery companies has slowed down, with the top two companies accounting for 72% in 2022, which has remained at 70% this year, leaving around 30% of space for other companies. In the past two years, the new energy vehicle and energy storage industries have been highly prosperous, leading to a rapid increase in battery demand. The proportion of new energy vehicle batteries installed has decreased. Due to the slowdown in the growth of the electric vehicle export market, the growth in battery installation demand for electric vehicles has been slower than the overall increase in domestic vehicle production. Due to the impact of policy adjustments to increase the tax exemption for electric vehicles with longer ranges in the first half of this year, the low-end micro electric vehicle market has shrunk, pure electric vehicles are showing a weak trend, while extended-range and plug-in hybrids continue to be strong. However, in July, the policy of scrapping and replacing old cars was strengthened, and in September, the impact of the new-for-old car subsidy was obvious, benefiting micro electric vehicles significantly. Pure electric vehicle growth was strong in September and October, with a significant increase in the proportion of batteries in the 125-140 Watt-hour per kilogram range. 1. Proportion of power battery installations Currently, the proportion of installed power batteries in power battery production is continuously decreasing. In 2021, the installation ratio of power batteries reached 70%, dropping to 54% in 2022 and 50% in 2023. In October 2024, the proportion of installed power batteries in production increased by 48%, with ternary installation rate at 49% and lithium iron phosphate at 47%. With the development of industries such as energy storage, especially the world energy crisis brought about by the Russia-Ukraine crisis, the demand for batteries in industries such as energy storage is growing rapidly, leading to a significant decrease in the proportion of batteries installed but an increase in October due to strong market sales. Both power batteries and energy storage batteries suffer from oversupply and relatively high inventory pressure. The growth rate of power batteries in 2021 and 2022 was lower than that of complete vehicles, and in 2024, the installation of power batteries was relatively low, with battery production matching the growth rate for installations. 2. Continuous decrease in the proportion of ternary installations in domestic vehicle type approval certificates The demand for installed power batteries is fluctuating. In 2019, the demand increased by 10%; in 2020, the installation of power batteries for domestic vehicle types was 64GWh, with only a 2% increase in demand; in 2021, the installation reached 155GWh, a 143% increase in demand; in 2022, the installation was 295GWh, with a 91% increase in demand; in 2023, the installation was 388GWh, with a 32% increase in demand. In October 2024, the installation of lithium-ion batteries was 59.2Wh, a year-on-year increase of 51%. The installation of ternary batteries was 12.2GWh, a year-on-year decrease of 1%, accounting for 21%, which was lower than the same period; while the installation of lithium iron phosphate batteries was 47GWh, a year-on-year increase of 75%, accounting for 79%, the growth of ternary batteries has slowed down. From January to October, the installation of lithium-ion batteries was 406G, an increase of 38% year-on-year. 3. Continuous strong growth in automotive battery demand The demand for passenger car batteries continues to grow strongly, with a 22% increase in battery demand for pure electric passenger cars in 2024, and an 84% increase in battery demand for plug-in hybrid passenger cars, showing sustained strong growth. With the strong demand for new energy passenger vehicles, in October, the battery installation in passenger cars increased by 51%, while the battery demand for pure electric special vehicles saw a significant growth of 105%. From the perspective of the proportion of battery installations, the demand structure of power batteries has been rapidly changing in recent years. In 2020, pure electric passenger cars were still in the first place, followed by pure electric passenger buses and then pure electric special vehicles, with plug-in hybrid passenger cars in fourth place. However, this year, pure electric passenger cars remain in first place, plug-in hybrid passenger cars have risen to second place, pure electric special vehicles have moved up to third place, while pure electric passenger buses have dropped to fourth place. In recent years, the market for pure electric passenger buses has sharply declined, while the usage of batteries in pure electric special vehicles has risen quickly. Currently, the proportion of pure electric passenger buses has decreased from 18.5% in 2020 to 1% in 2024, a decrease of 17 percentage points. The usage of batteries in plug-in hybrid passenger cars has grown relatively rapidly, increasing from 7% in 2021 to 22.2% this year, an increase of 15%, while pure electric vehicles have dropped to 66%, plug-in hybrids and pure electric vehicles maintain a dominant position in passenger car battery demand, accounting for around 90%. 4. Production of vehicle type approval certificates According to the estimated amount of batteries in vehicle type approval certificates, the production of new energy vehicle products in October 2024 was 1.28 million units, a 51% year-on-year increase. From January to October, 8.69 million units were produced, a strong 39% year-on-year increase, with 4.71 million units of pure electric passenger cars, an 18% increase, 3.53 million units of plug-in hybrid passenger cars, an 81% increase, and 410,000 units of pure electric special vehicles, a 46% increase. These production figures are still favorable. 5. Supporting battery companies are far from competitive In the past few years, the competitive landscape of the battery market has not changed.Obvious change. Due to the relatively slow technological progress in the power battery market, and the relatively obvious characteristics of scale growth, battery companies have obtained strong features of production and shipment quantity growth.The original battery landscape has not changed significantly. The one who invests more will gain a larger market share, leading to the continued strong expansion performance of major battery companies. Meanwhile, medium and small battery companies also have opportunities for growth through technological breakthroughs or other means. Therefore, the battery landscape should be relatively stable in the high-speed growth. However, there are relatively large opportunities for changes in the battery industry in the future. The trend of car companies producing batteries or collaborating with related companies to produce batteries is becoming increasingly evident, and battery companies will gradually form core products for the entire vehicle. Currently, there is a strong demand for the high-end electric vehicle market. The demand for small and micro-sized cars, as well as low-end family mobility, is increasing. Especially, there is a high demand for economical electric cars due to the impact of the pandemic. However, the lack of tax incentives for short-range electric cars in the second quarter of this year has led to a clear trend towards high-end vehicles. Recently, with policies such as trade-in programs promoting the popularity of micro electric cars. In terms of the supply chain, car companies will become stronger in the future, further enhancing their control over battery companies and upstream industries, as well as strengthening their control over brand marketing capabilities downstream. In the new energy system, the characteristic of "the vehicle is king" will continue to be reflected. 6. The need for high energy density batteries to decrease The mainstream battery energy density for electric vehicles currently ranges from 125 to 160. Especially in October 2024, the proportion of batteries with energy densities between 125 and 140 accounted for 68%, a 26 percentage point increase from last year. In the period from January to October 2024, the proportion of models with energy densities above 160 was 12%, a noticeable decrease from 18% in 2023. This is mainly due to the decrease in energy density brought by the substitution of phosphate iron lithium batteries by ternary materials. The proportion of products with energy density below 125 decreased from 9% in 2023 to 5% in 2024, dropping to 2% in October. 7. Battery company landscape The competition landscape of battery companies is mainly dominated by Contemporary Amperex Technology and BYD Company Limited. Currently, the gap between BYD Company Limited and Contemporary Amperex Technology is still large, with BYD Company Limited's share rising from 15% in 2020 to 25% in 2024, reaching 26.9% in October. Contemporary Amperex Technology's share in October dropped to 43%, showing a clear differentiation in the market share of other battery companies. There is a trend of the slowdown in the concentration of top battery companies, with the top two companies holding a proportion of 70% this year, compared to 72% in 2022, leaving around 30% of the market share for other companies. The product differentiation advantages of phosphate iron lithium batteries are evident. BYD Company Limited is relatively superior, but was in an adjustment period at the beginning of the year, followed by a price reduction leading to an increase. The market share of Contemporary Amperex Technology's iron lithium batteries surpassed BYD Company Limited in the first quarter of this year, with BYD Company Limited recovering in the 4th to 6th months, but showing weaker production in October. Eve Energy Co., Ltd. and CALB's performance has been relatively stable. Sunwoda Electronic, Ruipulan Jun, and Jidian New Energy have shown significant improvement. As BYD Company Limited transitions to phosphate iron lithium batteries, the advantages of ternary batteries of top three companies like Contemporary Amperex Technology become more evident, with good performance from Beehive Energy and CALB in October.