The “oil-electricity battle” has entered a critical year. How much can battery prices drop?
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In 2023, the battery new energy industry chain is unprecedentedly volatile, and performance is 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, problems such as price reduction and inventory reduction in the battery new energy industry have not yet been alleviated, and the price war began at the beginning of the year.
Among automobile companies, BYD, Changan Qiyuan, Nezha Auto, SAIC-GM-Wuling, Geely Auto, Beijing Hyundai, Buick and other "electric" and "oil" car companies have started a price war in an attempt to occupy more market share.
Battery Network noted that as the core of electric vehicles, power batteries account for about 40% of the total vehicle cost. The price war among car companies is inseparable from the rapid decline in the cost of power batteries.
As early as 2013, Guotai Junan Securities believed in a research report that the price of lithium batteries will drop by half in the next 5 to 10 years. In terms of market performance, from scarcity to surplus, from skyrocketing to plummeting, it has only been two years, and the competition in the battery industry has become increasingly fierce.
According to data disclosed by Sullivan, the overall price of power lithium batteries in my country has been on a downward trend since 2017, with the average price of power lithium battery cells falling from 0.75 yuan/Wh in 2017 to 0.52 yuan/Wh in 2021. In 2022, due to a sharp increase in upstream material prices, the average price of power lithium battery cells rose sharply to 0.79 yuan/Wh. In 2023, the price of power lithium battery materials fell, and the average price of power lithium battery cells is estimated to be around 0.55 yuan/Wh.
The reasons for the decline in power battery prices are mainly due to the sharp drop in raw material prices, cost reduction brought about by improvements in power battery technology, and market competition brought about by overcapacity in 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 a vehicle, and is still increasing." That year, the price of raw material lithium carbonate rose to a historical high of nearly 600,000 yuan per ton.
In 2023, the average spot price of battery-grade lithium carbonate was 262,000 yuan/ton, nearly halved year-on-year. At the beginning of the year, the price of lithium carbonate was still at a high level of nearly 600,000 yuan/ton. At the end of the year, the price of lithium carbonate per ton in the futures and spot markets fell below 100,000 yuan, and the price fell by more than 83% throughout the year.
In terms of the latest prices, according to Shanghai Nonferrous Network data, on February 23, the price of battery-grade lithium carbonate was 93,500-99,000 yuan/ton, with an average price of 96,300 yuan/ton, up 100 yuan/ton from the previous working day. Data released by Shanghai Steel Union showed that the price of battery-grade lithium carbonate on that day was the same as the previous time, with an average price of 97,000 yuan/ton. Data from Sino-Trade showed that the base price of battery-grade lithium carbonate was 99,000 yuan/ton, down 1.79% from the beginning of this month (100,800 yuan/ton).
Overall, the price of battery-grade lithium carbonate has stabilized at less than 100,000 yuan this year, creating room for battery costs to fall.
In addition to the fluctuations in raw material prices, battery manufacturers also focus on modifying process structures and optimizing battery material improvements, hoping to establish a leading position in the relevant battery field through new process improvements and new technology applications, and to form a leading advantage through differentiated strategies, thereby bringing strong industry benefits.
EVTank data shows that in terms of production capacity, by the end of 2026, the planned total production capacity of 46 companies included in the statistics worldwide will reach 6730.0GWh, an increase of 182.3% compared with the actual production capacity in the first half of 2023.
In terms of demand, the global demand for power (energy storage) batteries will be 1096.5GWh and 2614.6GWh in 2023 and 2026 respectively, and the nominal capacity utilization rate of the entire industry will drop from 46.0% in 2023 to 38.8% in 2026.
The battery industry's structural overcapacity and inventory reduction pressure will continue. In the absence of obvious technological breakthroughs, it is expected that a large amount of production capacity will be sold based on price advantages.
In addition, since 2020, in order to cope with the anxiety of power battery supply and enhance their voice in the industrial chain, vehicle manufacturers have intensively released plans to develop and manufacture power batteries. According to the battery network, by the end of 2023, domestic vehicle manufacturers such as BYD, Great Wall Motors, Weilai, Geely Automobile, GAC Group, Changan Automobile, Ideal Auto, FAW Group , Chery Group, SAIC Group, and JAC Motors are gradually implementing their plans to develop and manufacture power batteries. In order to control costs and take the initiative, more and more car companies are joining the ranks of developing their own batteries or increasing their technology reserves.
In 2024, the "oil-electricity battle" will enter a critical year, and market competition will become increasingly fierce. The price reduction space for batteries, as core components, will become the focus of industry attention.
Soochow Securities recently analyzed that from a cost perspective, domestic low-end and mid-range battery quotations have fallen to cash costs, and prices have basically bottomed out. Since the second half of 2023, domestic battery prices have fallen rapidly, lithium carbonate prices have fallen, and factors such as destocking have led to fierce competition. In February 2024, the price of iron-lithium power cells was 0.4 yuan/Wh (tax included), which was close to the cost price.
Soochow Securities cited an example, saying that based on the lithium carbonate price of 95,000 yuan/ton, the bom cost of iron-lithium batteries is 0.27 yuan/Wh, and the manufacturing cost is 0.06 yuan/Wh. Considering a 95% yield and 70% capacity utilization, the battery cell cost is 0.37 yuan/Wh (excluding tax), and the tax-inclusive cost has exceeded 0.4 yuan/Wh. The cash tax-inclusive cost is 0.38 yuan/Wh, and some iron-lithium batteries have fallen to cash cost.
Soochow Securities pointed out that from the perspective of raw materials, lithium carbonate still has room to fall to 80,000 yuan, and most midstream materials have limited room for price decline. Therefore, the subsequent impact of raw materials on battery prices is expected to be only 0.01-0.02 yuan/Wh, and the room for decline is very limited.
Yu Qingjiao, Secretary General of the Zhongguancun New Battery Technology Innovation Alliance and Chairman of the Battery 100 Association, pointed out that in 2024, the battery new energy track will reach a critical node, pushing the industry from internal competition to rational competition. The industry is facing many challenges, product destocking continues, the pace of industry expansion slows down, overseas market development is still difficult, and the challenges of intelligentization of auto companies are intensifying.
Challenges bring opportunities. Yu Qingjiao suggested that while focusing on improving product and technological competitiveness, we should fully tap the growth potential of market segments and strengthen the resilience of the supply chain by targeting commodity supply and demand and price volatility risks.
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