CICC: The turning point of the fundamentals of new energy vehicles is established, ushering in a new round of the lithium battery and technological innovation cycle.

China International Capital Corporation (CICC) released a research report stating that the domestic market is benefiting from the increase in electric vehicle mileage and continued volume growth in new scenarios, with the demand for power batteries expected to continue to grow at a high rate; in the European market, with the start of a new vehicle cycle, demand is expected to accelerate recovery. By 2025, as the demand side continues to exceed expectations driven by energy storage, the supply and demand relationship in the industry chain will further improve, with top manufacturers in the third quarter of 2025 almost at full capacity, leading to price increases in energy storage battery cells, 6F, and VC links. Looking ahead to 2026, a new round of rise in the lithium battery cycle is expected to start, and energy storage is expected to become the core "driver". At the same time, a new round of lithium battery technology focused on solid-state batteries is accelerating towards industrialization. CICC's main points are as follows: A new growth cycle is coming, and energy storage is expected to become a core growth point. In the new energy vehicle sector, the domestic market is benefiting from the increase in electric vehicle mileage and continued volume growth in new scenarios, and the demand for power batteries is expected to continue to grow at a high rate; in the European market, with the start of a new vehicle cycle, demand is expected to accelerate recovery. In terms of energy storage, with the introduction of capacity-based pricing policies in various provinces in China, independent energy storage has reached an inflection point in terms of economy. Energy storage demand in China is expected to exceed expectations in 2026; the US market is expected to see an increase in demand in the second half of 2025 due to tariff impacts, and post-2026 AIDC storage demand is expected to contribute to new volumes, driving demand beyond expectations. The inflection point of supply and demand is here, and the price reversal trend is established. By 2025, with the demand side driven by energy storage continuing to exceed expectations, the supply and demand relationship in the industry chain will further improve. The top manufacturers in the third quarter of 2025 are almost at full capacity, leading to price increases in energy storage battery cells, 6F, VC, and other links. Looking ahead to 2026, it is expected that capital expenditures in the battery segment will remain high, but overall synchronization with demand growth, and the addition of new production capacity in the materials segment will be relatively low, and utilization rates are expected to further increase. If energy storage demand exceeds expectations, the price reversal trend is expected to continue. A new technology cycle is starting, and the industrialization of solid-state batteries is accelerating. By 2025, the industrialization of all-solid-state sulfide batteries will enter the pilot phase, with the semi-solid-state oxide/polymer composite route accelerating. Looking ahead to 2026, all-solid-state sulfide batteries are expected to usher in small-scale production and trial vehicles, with process routes and material systems expected to converge. Investment recommendation Investment strategy: 1) Main line one: optimistic about energy storage demand exceeding expectations, driving the reversal trend of the sector. Key recommendations: lithium battery materials (6F, VC, lithium iron phosphate cathodes), batteries, and general components; 2) Main line two: optimistic about new technologies as a high-slope investment direction for the lithium battery sector, continuous breakthroughs in industrialization in 2026, with a focus on solid-state batteries, sodium batteries, and their industrial chain; 3) Main line three: optimistic about value reassessment brought about by policy reinforcement, the revival of charging pile construction, and the establishment of new scenarios or industrial trends. Risk factors Global new energy vehicle sales fall short of expectations; global energy storage equipment demand falls short of expectations; market price competition intensifies leading to declining profits; and the industrialization progress of new technologies falls short of expectations.