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In 2023, the battery new energy industry chain experienced unprecedented volume and performance was mostly not optimistic. However, many industry insiders predict that 2023 will be the best year for the battery new energy industry in the next 10 years.

At the beginning of 2024, the problems of price reduction and destocking in the battery and new energy industry have not yet eased, and the price war has begun.

In terms of automotive companies, BYD, Changan Qiyuan, Nezha Automobile, SAIC GM Wuling, Geely Automobile, Beijing Hyundai, Buick and other "electric" and "gasoline" cars are engaging in price wars in order to gain more market share.

Battery Network has noticed that as the core of electric vehicles, the cost of power batteries accounts for approximately 40% of the total vehicle cost. Behind the price war among car companies, the rapid decrease in the cost of power batteries is indispensable.

As early as 2013, Guotai Junan believed in a research report that the price of lithium batteries would decrease by half in the next 5-10 years. In terms of market performance, from scarcity to surplus, from skyrocketing to plummeting, it has only been in the past two years that the competition in the battery industry has become increasingly fierce.

According to data disclosed by Sullivan, since 2017, the overall price of power lithium batteries in China has shown a downward trend. The average price of power lithium battery cells has decreased from 0.75 yuan/Wh in 2017 to 0.52 yuan/Wh in 2021. In 2022, due to a significant increase in upstream material prices, the average price of power lithium battery cells has risen significantly to 0.79 yuan/Wh. In 2023, the price of power lithium battery materials will decrease, and the average price of power lithium battery cells is estimated to be around 0.55 yuan/Wh.

Exploring the reasons for the price decline of power batteries mainly comes from the significant decline in raw material prices and the cost reduction brought about by the improvement of power battery technology, as well as the market competition brought about by the overcapacity of power batteries.

Zeng Qinghong, Chairman of GAC Group, publicly stated in July 2022 that "the cost of power batteries accounts for 40%, 50%, and 60% of the total cost of automobiles, and is constantly increasing." That year, the price of raw material lithium carbonate per ton rose to a historical high of nearly 600000 yuan.

In 2023, the average spot price of battery grade lithium carbonate was 262000 yuan/ton, nearly halving year-on-year. At the beginning of the year, the price of lithium carbonate was still at a high level of nearly 600000 yuan/ton. At the end of the year, in both futures and spot markets, the price of lithium carbonate per ton fell below 100000 yuan, with a price decline of over 83% throughout the year.

In terms of the latest prices, according to data from Shanghai Nonferrous Metals Network, on February 23, battery grade lithium carbonate was quoted at 93500 to 99000 yuan/ton, with an average price of 96300 yuan/ton, an increase of 100 yuan/ton from the previous working day. According to data released by Shanghai Steel Union, the price of battery grade lithium carbonate remained unchanged on that day compared to the previous time, with an average price of 97000 yuan/ton. According to data from Business Society, the benchmark price of battery grade lithium carbonate is 99000 yuan/ton, a decrease of 1.79% compared to the beginning of this month (100800 yuan/ton).

Overall, the price of battery grade lithium carbonate has remained stable within 100000 yuan this year, creating space for a decrease in battery costs.

In addition to fluctuations in raw material prices, battery manufacturers also focus on modifying process structures and optimizing battery material improvements. With the aim of improving new processes and applying new technologies, we aim to establish a pioneering position in the field of related batteries, form a leading advantage through differentiation strategies, and ultimately bring strong industrial benefits.

According to EVTank data, by the end of 2026, the planned total production capacity of 46 companies included in the statistical scope worldwide will reach 6730.0 GWh, an increase of 182.3% compared to the actual production capacity in the first half of 2023.

In terms of demand, the global demand for power (energy storage) batteries in 2023 and 2026 will be 1096.5 GWh and 2614.6 GWh, respectively. The nominal capacity utilization rate of the entire industry will decrease from 46.0% in 2023 to 38.8% in 2026.

The structural overcapacity and destocking pressure in the battery industry will continue, and without significant technological breakthroughs, it is expected that a large amount of production capacity will be sold based on price advantages.

In addition, since 2020, in response to the supply anxiety of power batteries and to enhance their voice in the industry chain, vehicle manufacturers have intensively released plans to develop and manufacture their own power batteries. According to the analysis of Battery Network, by the end of 2023, domestic vehicle manufacturers such as BYD, Great Wall Motors, NIO, Geely Automobile, GAC Group, Changan Automobile, Ideal Automobile, FAW China, Chery Group, SAIC Group, and Jianghuai Automobile are gradually implementing their self-developed and self manufactured power battery plans. In order to control costs and take the initiative, more and more car companies are joining the ranks of self-developed batteries or increasing technological reserves.

In 2024, the competition for oil and electricity has entered a critical year, and market competition has become increasingly fierce. As a core component, the price reduction space for batteries will become a focus of industry attention.

Recently, Dongwu Securities analyzed that from a cost perspective, the domestic mid to low-end battery quotations have fallen to cash costs, and the prices have basically bottomed out. Since the second half of 2023, the domestic battery prices have experienced a rapid decline, and the price of lithium carbonate has decreased, coupled with factors such as destocking, resulting in fierce competition. In February 2024, the price of iron lithium power battery cells was 0.4 yuan/Wh (including tax), which was close to the cost price.

For example, Dongwu Securities stated that based on the price of 95000 yuan/ton of lithium carbonate, the cost of iron lithium battery cell BOM is 0.27 yuan/Wh, and the manufacturing cost is 0.06 yuan/Wh. Considering a 95% yield rate and 70% capacity utilization rate, the cost of battery cells is 0.37 yuan/Wh (excluding tax), and the cost including tax has exceeded 0.4 yuan/Wh. The current cost including tax is 0.38 yuan/Wh, and some iron lithium battery cells have fallen to cash cost.

Dongwu Securities pointed out that from the perspective of raw materials, there is still room for lithium carbonate to fall to 80000 yuan, and the price of most midstream materials has limited downward space. Therefore, the impact of subsequent raw materials on battery prices is expected to be only 0.01-0.02 yuan/Wh, and the downward space is already very limited.

Yu Qingjiao, Secretary General of the Zhongguancun New Battery Technology Innovation Alliance and Chairman of the Battery Hundred People Association, pointed out that in 2024, the battery new energy track will reach a key node, promoting the industry from internal competition to rational game. The industry is facing numerous challenges, with continuous destocking of products, slowing down the pace of industry expansion, continuing difficulties in expanding overseas markets, and intensifying challenges in the intelligentization of automotive companies.

Under the challenges, there are hidden opportunities. Yu Qingjiao suggested that while focusing on enhancing product and technological competitiveness, we should fully tap into the growth potential of segmented markets, and strengthen the resilience of the supply chain in response to the supply and demand and price fluctuation risks of commodities.

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