Cui Dongshu: Weak demand for lithium batteries in November, battery production companies are expected to reduce production and holidays in early next year to correspond to demand fluctuations.

On December 28th, Cui Dongshu, Secretary General of the China Passenger Car Association, stated that the performance of the automotive market at the end of the 14th Five-Year Plan basically met expectations, with strong growth from January to September this year. Therefore, the fourth quarter shows clear signs of deceleration due to the accumulation of momentum. Demand for new energy lithium batteries in the fourth quarter is severely weak, leading to significant reductions in production plans and an increase in downtime for upstream suppliers by early 2026. Profit margins for materials in the new energy sector are extremely lucrative, with profit rates reaching 30% in the non-ferrous mining industry from January to November, which is 7 times higher than that of the automotive industry. Stable prices and a reasonable pace of supply and demand balance are crucial for industrial development, as profit imbalances in the industrial chain are detrimental to the industry. It is hoped that the industrial chain will operate more smoothly and steadily. Looking ahead to 2026, domestic demand for new energy lithium batteries is expected to significantly decrease at the beginning of the year, prompting battery manufacturers to reduce production and adjust to fluctuations in demand. The reasons for this include: first, the adjustment of the vehicle purchase tax policy will cause a decrease of at least 30% in sales at the beginning of 2026 compared to the fourth quarter of the previous year; second, commercial vehicles will face a significant decrease at the beginning of the year following the rush to benefit from subsidies and tax exemptions at the end of the previous year; third, although exports of new energy vehicles will continue to be good at the beginning of 2026, the demand for batteries from independent suppliers will not be significant; fourth, the demand for energy storage in the US will not have a significant impact on domestic battery exports, with a sharp decline seen in exports to the US in 2025, and the demand for energy storage driven by US AI technology has limited impact domestically; fifth, the bidding price for domestic energy storage is significantly lower than 300 yuan/kWh, indicating weak demand for price increases, while vehicle batteries cannot offset losses from energy storage. 1. Overall demand analysis for lithium batteries Demand for new energy lithium batteries in the fourth quarter is severely weak, with significant reductions in original production plans. Due to the impact of subsidy policy controls on new energy vehicle demand in the fourth quarter, demand for lithium batteries for passenger vehicles has significantly decreased, with electric vehicle battery production for November growing by 23% year-on-year, while retail battery sales only increased by 13%. Exports of new energy passenger vehicles have shown significant growth, driving good growth in demand for new energy batteries. The main contributor to the export of new energy passenger vehicles is BYD Company Limited, which produces its own batteries, meaning that social battery suppliers rely mainly on sudden surges in production of new energy commercial vehicles at the end of the year. Looking ahead to 2026, demand for new energy batteries at the beginning of the year is expected to decline significantly, prompting manufacturers to reduce production and adjust to demand fluctuations. Firstly, policy adjustments to vehicle purchase taxes will lead to a decrease of at least 30% in sales of new energy passenger vehicles in early 2026 compared to the fourth quarter; secondly, commercial vehicles powered by new energy will inevitably face a significant decrease after the end-of-year surge; thirdly, exports of new energy passenger vehicles will remain good at the beginning of 2026, but the demand for batteries from independent suppliers will not be significant; fourthly, the demand for US energy storage will not have a significant impact on domestic battery exports, with a difficult recovery expected for exports to the US in 2026. 2. Analysis of lithium batteries used in production of new energy passenger vehicles According to calculations by the China Passenger Car Association, demand for lithium batteries used in the production of new energy passenger vehicles has continued to grow overall, with no apparent signs of an expected explosive growth. Production of plug-in hybrids in November saw a year-on-year decline of 10%, resulting in a decrease in demand for lithium batteries. In November, 72.86 million kWh of lithium batteries were used in the production of new energy passenger vehicles, showing a 23% increase, with significant contributions from exports. From January to November, 571.24 million kWh of lithium batteries were used in the production of new energy passenger vehicles, marking a 30% increase. 3. Analysis of domestic retail of lithium batteries for new energy passenger vehicles According to data from the China Passenger Car Association, demand for lithium batteries used in the domestic retail of new energy passenger vehicles has been significantly weak, with only 57.1 million kWh used in November and a weak trend observed from October to November. In November, domestic retail use of lithium batteries increased by 13%, representing a rare period of sluggish retail sales at the end of the year for new energy passenger vehicles, leading to a significant decrease in battery demand and a noticeable increase in inventory for new energy passenger vehicles. 4. Analysis of lithium batteries used in exports of new energy passenger vehicles Exports of new energy passenger vehicles have shown strong growth, maintaining high levels since April 2025. In the fourth quarter of 2024, due to tariff increases imposed by the European Union, the export of passenger vehicles by Shanxi Guoxin Energy Corporation experienced a sharp decline, resulting in low demand for batteries. Exports of new energy vehicles by BYD Company Limited in the fourth quarter of 2025 were strong, leading to a significant increase in exports of batteries. However, the growth in exports of vehicle batteries from social suppliers was relatively small. 5. Analysis of lithium batteries used in new energy commercial vehicles The growth of new energy commercial vehicles has been driven by strong government policies, with a significant increase in demand for electric trucks due to high subsidies. This has resulted in a surge in demand for batteries, with a 114% growth in demand for batteries used in new energy commercial vehicles. However, this strong demand is expected to decline sharply at the beginning of 2026 due to changes in subsidy policies. The demand for pure electric heavy trucks in early 2026 is expected to drop significantly. 6. Significant weakness in exports of lithium batteries Lithium batteries are considered an important advantage product in China's export market, with high profits and market demand. Since the inauguration of President Biden in 2020, China's export of lithium batteries has been relatively strong. In 2021, exports totaled $28.4 billion, increasing to $50.9 billion in 2022 and reaching a high of $64.9 billion in 2023, but growth slowed in 2024. This year, the monthly level of lithium-ion battery exports has remained stable at around $6 billion, rising to $7 billion in October, and falling to $6.8 billion in November, indicating a slowdown in growth. In the fourth quarter of 2024, driven by strong domestic subsidies for new energy, exports of lithium batteries continued to surge, leading to a fiery growth in the fourth quarter of the previous year. This year, domestic demand for lithium batteries has been weak, leading to continued reductions in production of new energy vehicles in the fourth quarter. The main market for China's lithium battery exports is the European Union, accounting for around 40% of the market demand, with a 4% increase from 2024 to 2025. China's exports of lithium batteries to the US have sharply declined by 9.5 percentage points from 2024 to 2025. The decline in exports to the US corresponds to the total size of exports to the third-largest market in Southeast Asia. China's mainland exports of lithium batteries to the US have seen a significant overall decline, dropping from $1.87 billion in the previous year to $1.04 billion this year, a decrease of 45%, with export prices also falling by 22%. This reflects the significant increase in electric power and energy brought by AI in the US, which has not yet been related to China's lithium battery exports.