The Second Spring of Lithium Iron Phosphate

Since 2015, the ratio of cars to charging piles in China has dropped by half. Currently, three cars share one charging pile, which greatly improves the freedom of consumers. At the same time, domestic fast charging technology has reached the international leading level, with a 5-minute charge and a range of 150 kilometers.

Netizens were amused, saying that this really is "wash your hands, smoke a cigarette, go to the bathroom, and then run a few hundred kilometers."

Only when consumers can afford it and it is easy to use after buying it, can the law of true fragrance continue.

The fourth driving force: hundreds of billions of new alternative markets

Lithium iron phosphate batteries are not only used in electric vehicles. The vast emerging markets (5G base stations, new energy power generation) and replacement markets (lead-acid batteries) are just beginning.

With the advent of the 5G era, the upgrade and reconstruction of 4G base stations and the construction of new 5G base stations will also usher in a climax. At the same time, the power consumption of 5G base stations is about 3 times that of 4G base stations, and the corresponding energy storage market is larger. Currently, the public bidding for energy storage batteries for base stations is almost all lithium iron phosphate batteries, which will continue to dominate the base station energy storage market in the future.

The cost advantage of lithium iron phosphate batteries is more prominent in the development of new energy storage (solar power generation, wind power generation, etc.), household batteries and other emerging use scenarios, not only for base station energy storage. At the same time, lithium iron phosphate batteries with higher safety and lower costs will further open up the hundreds of billions of replacement space in the lead-acid market.

The single-use cost of a lithium iron phosphate battery is about a quarter of that of a lead-acid battery and half of that of a ternary battery. The law of "true fragrance" is really everywhere.

Considering the emerging markets and replacement markets, it is predicted that the three-year compound growth rate of lithium iron phosphate will reach 56% from 2020 to 2022.

Investment Outlook: Where are the upstream and downstream investment opportunities?

The return of lithium iron phosphate batteries also brings many potential investment opportunities.

The upstream lithium sources mainly come from Tianqi Lithium, Ganfeng Lithium, and Yahua Group; the iron sources mainly come from Henry New Energy, Hubei Wanrun, and Guizhou Anda; the phosphorus sources mainly come from Ruixing Chemical, Sichuan Chuanhong, Hubei Xingfa, and major equipment suppliers Jiangsu Qianjin, Juzi Powder, and Beijing Saideli.

The main midstream manufacturers are BYD, Defang Nano, Shenzhen Zhuoneng, and Guizhou Anda. The main downstream users are CATL, BYD, Guoxuan High-tech, and EVE Energy.

Upstream suppliers, whose performance is mainly affected by fluctuations in raw material prices, have strong cyclical effects and large performance fluctuations. Midstream manufacturers, which continue to expand production capacity, tend to be decentralized in the short term, and industry competition is stimulating, but the leading manufacturers are fully produced and fully sold, and have obvious advantages. In the long run, the concentration of the leading manufacturers continues to increase. Downstream users, the agglomeration effect continues to be prominent, the leading R&D capabilities continue to increase, the scale cost advantage is obvious, the strong will always be strong, and a stable situation of multiple oligopolies will gradually form.

Overall, lithium iron phosphate batteries continue to penetrate the passenger car field and continue to expand in the emerging replacement market. The expansion of demand has led to the continuous expansion of supply capacity, and the leading effect continues to intensify.

In June 2020, Li Xiang, founder of Ideal Auto, asked a soul-searching question: "Why does a Tesla with a range of only 445 kilometers have such a huge sales volume and has beaten its competitors?" Li Xiang's question reveals the current state of the industry: the competition in the electric vehicle field is no longer just about hard technologies such as range and energy density. The comprehensive improvement of the cost-effectiveness of the whole vehicle has just begun, and lithium iron phosphate has great potential.

With changes in industry policies, technological advances, and new alternative markets, the lithium iron phosphate sector has come from behind, with passenger cars on the left hand and new markets on the right hand. Spring has just begun.