Analysis of power batteries in the first quarter of 2021

At the end of a quarter, we need to make a detailed comparison of the actual situation of power batteries in the first quarter. First, let's quote the data released by the China Automotive Power Battery Industry Innovation Alliance. The production, sales and installed capacity in March were 11.3G, 8.9G and 9.0G respectively, and the cumulative Q1 production, sales and installed capacity were 32.8G, 23.9G and 23.2G respectively. We will discuss this step by step based on this data.

Figure 1 Power battery production and vehicle installation

1) Production and loading volume

As shown in Figure 1 above, the difference between the output and installation of power batteries is more than 5GWh every quarter, and the cumulative amount for three quarters is 23.4GWh. In fact, if we extend the cycle, starting from February last year, the difference has remained stable at 2-8 GWh. There are several explanations here: battery production cycle (I shifted this explanation by one month, and the effect in Figure 3 shows that the production rhythm from December to January cannot be matched), battery shortage inventory (battery modules and battery systems occupy a large warehouse, and it is really hard to say whether this is to prepare for the next quarter's rush). Of course, it is also possible that some of the batteries are used for maintenance or replacement. Overall, this precursor can either reflect that the demand in the next Q2 and Q3 will continue to increase. Of course, there are several assumptions here:

A) The current Q1 power battery production is at a high level, and Q1 installation has not kept up. The current price increase of chips and other materials makes it difficult to increase the subsequent battery production.

B) If the subsequent production schedule of vehicle manufacturers goes as planned, the corresponding potential gap of 23.4GWh should be calculated based on the installed capacity in Q1, which will bring electric vehicles to a higher level in Q2.

Figure 2 Differences in power battery production and installed capacity

Figure 3 can be explained after translation for 2020. It is possible that the batteries produced in Q1 will be used in the following quarters.

2) Quarterly comparison of iron-lithium and ternary

Production: In March, the output of ternary batteries was 5.8GWh, accounting for 51.6% of the total output, an increase of 79.6% year-on-year and 13.7% month-on-month; the output of lithium iron phosphate batteries was 5.4GWh, accounting for 48.3% of the total output. The cumulative output of ternary batteries from January to March was 17.8GWh (54.3%);

Loading volume: In March, ternary batteries were loaded with 5.1GWh, and lithium iron phosphate batteries were loaded with 3.9GWh. From January to March, the cumulative loading volume of ternary batteries was 13.8GWh (accounting for 59.5%), and the cumulative loading volume of lithium iron phosphate batteries was 9.4GWh (accounting for 40.4%).

At present, the difference between iron-lithium and ternary is actually narrowing, especially in passenger cars, where more and more models are starting to use iron-lithium. After breaking through the bottleneck of 190Wh/kg of battery cell energy density, we have seen the change of iron-lithium mainly in the rapid penetration of passenger cars. The difference between ternary and iron-lithium in Q1 is mainly due to the decrease in demand for buses in the first quarter.

Figure 4 Differences in iron-lithium ternary batteries from Q3 2020 to Q1 2021 (production and installed capacity)

This quarter, the overall share of buses has been compressed to 5%-8%, so the overall demand for LFP will be reduced. As the demand for LFP in passenger cars increases, the overall share of LFP will soon exceed three yuan.

Figure 5: The proportion of different segments in the past six months

3) Average installed capacity of passenger cars

The problem of average installed capacity is quite serious. With the increase in the proportion of A00, the installed capacity of pure electric passenger cars BEV in March was successfully reduced to 40kWh per vehicle, which is 11kWh less than the peak in December. The data in December was 183,000 BEVs corresponding to 9.42GWh. By March, 176,000 BEVs had 7.17GWh, a difference of about 2.3 GWh, which is not a small number. If we extrapolate the previous algorithm, 2 million passenger cars, of which PHEVs account for 15%, 300,000; 1.7 million pure electric cars, if installed at 40kWh, the overall demand scale is only 70 GWh. For reference, last year's BEVs were 991,000, corresponding to 43GWh. Because the increase in PHEVs and other segments is not expected to be obvious in the short term, if this algorithm is used, the increase of 27GWh is indeed not much.

Figure 6 Average battery capacity of BEV passenger cars

4) Supplier’s situation

The supply of power batteries is evolving unilaterally. With the difference in the speed of production expansion, the difference between the second-tier companies that can keep up and those that cannot is huge. Electric vehicles are differentiated between the top and bottom. Either they choose to continue to play at low cost, or they go out and try overseas markets. This is a necessary strategy.

Figure 7: Situation of major battery suppliers in 2021

Summary: As the problem of negative fuel consumption points becomes more prominent, A00 cars still have strategic value in offsetting this problem. On the one hand, they can increase the overall new energy vehicle volume faster, but of course, the pull on battery demand is not obvious. This round of practice of replacing ternary with LFP and then reducing prices to expand the scope of application is also very obvious.