EB SECURITIES: High oil prices drive up the penetration rate of electrification, lithium battery materials are expected to see a simultaneous increase in both quantity and price.

Recently, EB Securities released its latest report on the lithium battery industry, stating that the recent trading activity in the lithium battery sector is driven by the increase in electrification penetration rates under high oil prices, resonating with the high growth in first-quarter performance and continued high production levels in the second quarter. The economic viability of commercial vehicles is sensitive to oil prices, and overseas electric heavy trucks are expected to see an increase in penetration rates. On March 25, according to the "Daily Economic News", Tang Xiuguo, Chairman of Sany Group, stated that since 2026, the company's domestic and overseas orders for electric heavy trucks have both grown by more than 50% year-on-year, and it is expected that in the next 2-3 years, overseas orders for electric heavy trucks will increase. According to ACEA data, by 2025, electric truck sales in Europe will reach 13,000 units, a year-on-year increase of over 70%, and electric trucks will account for 4.2% of total truck sales in the European Union in 2025. Commercial vehicles are highly sensitive to purchase and operating costs, and in a scenario where high oil prices continue, the overseas adoption of electric heavy trucks is expected to accelerate. Weakness in the overseas oil supply chain, coupled with high oil prices accelerating electrification, leads to a potentially higher-than-expected overseas demand for power. Cui Dongshu, Secretary-General of the China Passenger Car Association, stated that if oil prices remain high, it is expected to drive the penetration rate of new energy vehicles to continue to increase by 2-3 percentage points. The growth rate of domestic new energy vehicle sales is slowing, but power output has significantly increased, and it is expected that domestic power growth will remain stable in 2026. Domestic sales of new energy passenger cars are rebounding, with exports doubling According to estimates by the China Passenger Car Association, the retail market size of narrow passenger cars in March is approximately 1.7 million units, up 64.5% from the previous month but down 12.4% year-on-year. Among them, the retail volume of new energy vehicles is estimated to be around 900,000, with a penetration rate of approximately 52.9%. According to data from the China Association of Automobiles, the proportion of domestic sales of new energy passenger cars to total domestic passenger car sales is 43.7%, and the proportion of domestic sales of new energy commercial vehicles to total domestic commercial vehicle sales is 22%, which has fallen slightly due to the reduction in subsidies. In terms of exports, in January-February, the export of new energy vehicles was 583,000 units, a year-on-year increase of 1.1 times. Strong demand for energy storage, exports and increased power output driving growth in demand for power batteries According to the Power Battery Innovation Alliance, in January-February, China's cumulative sales of power and energy storage batteries reached 262.0GWh, a cumulative year-on-year increase of 53.8%. Among them, the cumulative sales of power batteries reached 177.2GWh, accounting for 67.6% of total sales, with a cumulative year-on-year increase of 36.5%. Exports and increased power output have driven the demand for power batteries to increase against the trend; the cumulative sales of energy storage batteries reached 84.8GWh, accounting for 32.4% of total sales, with a cumulative year-on-year increase of 108.9%, maintaining strong growth in demand under high lithium prices. Significant increase in single-vehicle power output, boosting demand for power batteries In January-February, the average power output per vehicle of Shanxi Guoxin Energy Corporation's vehicles was 64.9kWh, a year-on-year increase of 32.3%; among them, the power output per single electric truck was 239.8kWh, a year-on-year increase of 30.4%, and the power output per single electric passenger car was 65.4kWh, a year-on-year increase of 22.5%. The power output per single plug-in hybrid passenger car was 35.7kWh, a year-on-year increase of 38.6%. Risk Analysis: New energy vehicle sales may fall short of expectations, energy storage demand may fall short of expectations, and there is uncertainty in technological routes.