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On June 10, 2020, Central Finance and Economics released a news report stating that a "panic" caused the production of 3 million cars worldwide, highlighting the current shortage of car chips. The shortage of automotive chips is no longer a short-term issue. As early as December 2020, North and South Volkswagen stopped production due to the shortage of automotive chips.

Nowadays, the "core shortage" has not been alleviated, and the "battery shortage" is coming again! Since the beginning of this year, TSLA, NIO Motors, NIO Lithium, and others have all stated that there will be a shortage of power lithium batteries. This article will analyze the development of the "battery shortage" from both supply and demand perspectives, as well as the layout of various enterprises in responding to the "battery shortage".

Important listed companies in the power lithium battery industry: Currently, the major listed companies in the domestic power lithium battery industry include CATL (300750), BYD (002594), Funeng Technology (688567), Yiwei Lithium Energy (300014), Guoxuan High Tech (002074), Aoyang Shunchang (002245), Penghui Energy (300438), and Xinwangda (300207).

Core data of this article: global supply and demand gap for power lithium batteries, production and sales of new energy vehicles in China, monthly installation volume of power lithium batteries, and demand for power lithium batteries in Europe

1. The battery shortage is here

On June 10, 2020, Central Finance and Economics released a news report stating that a "panic" caused the production of 3 million cars worldwide, highlighting the current shortage of car chips. The shortage of automotive chips is no longer a short-term issue. As early as December 2020, North and South Volkswagen stopped production due to the shortage of automotive chips. Nowadays, the "core shortage" has not been alleviated, and the "battery shortage" is coming again!

Since the beginning of this year, TSLA, NIO Motors, NIO Lithium, and others have all stated that there will be a shortage of power lithium batteries.

According to SNER Research's prediction, by 2023, the global demand for power lithium batteries in electric vehicles will reach 406GWh, while the supply of power lithium batteries is expected to be 335GWh, with a supply and demand gap of about 18%. By 2025, the supply and demand gap will expand to about 40%.

2. On the demand side: The significant increase in sales of new energy vehicles has driven up the demand for power lithium batteries

Sales of new energy vehicles in China have skyrocketed

From the demand side, the shortage of batteries is mainly affected by the rising demand for power lithium batteries brought about by the new energy vehicle market. In recent years, the overall sales of new energy vehicles in China have shown an upward trend. In 2020, under the influence of the COVID-19, the production and sales of new energy vehicles still increased by 9.98% and 10.9%.

Since 2021, the sales of new energy vehicles have grown rapidly. In June, due to adverse factors such as a shortage of automotive chips and an increase in raw material prices, China's automobile production and sales showed a year-on-year decline, but the production and sales of new energy vehicles still maintained a rapid increase. From January to June 2021, China's production and sales of new energy vehicles reached 1.215 million and 1.206 million respectively, a year-on-year increase of two times.

The rapid increase in sales of new energy vehicles in China has led to an increase in the number of power lithium battery installations. In May 2021, the total installed capacity of power lithium batteries in China was 9.8GWh, an increase of 178.2% year-on-year; From January to May, the cumulative installed capacity of lithium batteries in China reached 41.4 GWh, an increase of 223.9% year-on-year. The increasing demand for power lithium batteries in China's new energy vehicle market has led to a surge in orders from power lithium battery companies.

——The European New Energy Vehicle Market Explodes

In addition to the demand for power lithium batteries from China, Europe is also an important source of growth for power lithium batteries in China. Due to the low production of local power lithium batteries in Europe, car companies often rely on imported batteries from Chinese, Japanese, and Korean companies. In 2019, Europe accounted for 25.3% of China's total lithium battery exports, and its contribution to the increase in China's lithium battery exports in 2019 reached 58.6%, becoming an important source of upward momentum.

In 2020, although the COVID-19 epidemic led to a sharp decline in the overall sales of vehicles, the sales of new energy vehicles in Europe increased by 142% year on year, which is directly related to the strict energy conservation and emission reduction standards of the European Union and the subsidy policies of various countries for new energy vehicles. In 2020, Europe accounted for 43% of the global new energy vehicle market share with sales of up to 1.367 million new energy vehicles, becoming the world's largest new energy vehicle market.

With the outbreak of the European new energy vehicle market, the demand for power lithium-ion batteries in Europe will significantly increase. According to T&E estimates, according to the EU's carbon emissions targets, the demand for power lithium batteries in Europe is expected to reach 174GWh by 2025 and 485GWh by 2035.

3. Supply side: Lithium batteries are affected by raw materials, resulting in tight supply

At the same time as the demand has increased significantly, the supply of raw materials for power lithium batteries is in short supply. Due to the concentration of global lithium, cobalt, and nickel resources overseas, they are monopolized by leading mining groups. In 2020, some mines experienced shutdowns, bankruptcies, and mergers. Currently, there are still unstable factors on the supply side, with the possibility of production contraction or a tendency to conservatively integrate resources, resulting in a shortage of raw material imports and tight supply.

The recent increase in the price of power lithium battery raw materials can reflect the current tight supply of power lithium battery raw materials. Since 2020, the factory price of battery grade lithium carbonate has increased from a minimum of 42000 yuan/ton to 95000 yuan/ton. Recently, lithium battery materials have experienced an off-season increase, and prices have remained high.

4. How will enterprises break through the "battery shortage"?

——Expand production and increase production, and take action together

Faced with the "battery shortage", various companies are stepping up their production layout. There are both battery companies such as CATL and BYD, or sole proprietorships of car companies to increase production and expand production, as well as deep cooperation between car companies and battery companies to layout production. For example, Funeng Technology will increase production through a joint venture with Geely Technology Group to build a battery factory.

——Layout and development of new batteries

In addition to laying out the production of power lithium batteries, various enterprises are also laying out research and development of new batteries, such as sodium ion batteries and solid-state batteries.

In terms of sodium ion batteries, on May 21, 2021, CATL Chairman Zeng Yuqun revealed at the company's shareholders' meeting that he would announce the release of sodium ion batteries around July this year. Zhongke Haina Technology Co., Ltd. (Zhongke Haina), the first company in China to focus on the research and manufacturing of sodium ion batteries, has also stated that as of 2020, there are about 20 companies worldwide engaged in the research and industrialization of sodium ion batteries.

In terms of solid-state batteries, China has numerous solid-state battery companies, including CATL, Huineng Technology and other battery companies, as well as car companies such as BYD and NIO. Among them, companies such as Huineng Technology and Ganfeng Lithium have already built solid-state battery production lines, but there are fewer companies that have achieved production and lower production.

In summary, due to the rapid increase in demand for lithium-ion batteries for new energy vehicles on the demand side and the supply side experiencing supply shortages, a "battery shortage" has been caused. Currently, companies are attempting to break through in terms of production and the development of new batteries.

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