The two leading battery companies in China and South Korea compete in their semi-annual reports

With the continuous expansion of the global new energy vehicle market , the power battery industry has ushered in new development opportunities and challenges.

Since 2024, the industry has been characterized by recovery and adjustment. Compared with the sharp fluctuations in industry prices and the decline in market demand for electric vehicles in 2023 , lithium battery companies in 2024 have made more balanced choices in terms of inventory, production capacity, and prices. This has also led to the overall stability of the lithium battery market since the first half of this year.

Recently, CATL and LG Energy Solution have successively released their second quarter and semi-annual performance reports, showing their latest progress in market position, performance growth, technology research and development, and global layout. As the world's two leading battery manufacturers, the operating conditions of CATL and LG Energy Solution reflect the changes in the global lithium battery market.

From the operating data, CATL achieved revenue of 166.77 billion yuan in the first half of 2024, down 11.9% year-on-year; LG Energy Solution achieved 12.3 trillion won (about 65 billion yuan), down 29.8% year-on-year. In terms of net profit, CATL reached 22.88 billion yuan in the first half of 2024, up 10.4% year-on-year; LG Energy Solution reached 352 billion won (about 1.85 billion yuan), down 67.8% year-on-year.

The decline in revenue of the two leading battery manufacturers in China and South Korea reflects some common factors in the global lithium battery market:

On the one hand, the global raw material prices have fallen sharply, which has led to a decline in the price of battery cells , resulting in a decline in the revenue of battery companies. On the other hand, the global lithium battery market competition is becoming increasingly fierce. With the influx of too many lithium battery companies in the early stage and the slowdown in downstream electric vehicle demand, the competition for lithium battery orders has become more intense.

However, as two representative battery manufacturers, CATL and LG Energy Solution face a global market environment, adopt market strategies, and use technology routes that are unique to them.

For example, CATL's main battlefield is in China, while LG Energy Solution's main battlefield is in the European and American markets; CATL's ternary battery and lithium iron phosphate battery technologies are on par with each other, while LG Energy Solution mainly relies on ternary batteries.

For a long time, CATL and LG Energy Solution have been each other's main competitors, and are also the first and second suppliers of many international automakers. With the release of the second quarter and semi-annual reports of 2024, the two old rivals CATL and LG Energy Solution are once again "fighting".

Overseas competition: CATL wins

The European and American markets are important players in the global electrification market, and are also the focus of CATL and LG Energy Solution's overseas market efforts.

Affected by overseas trade barriers and policy factors, CATL's overseas market shipments are mainly in Europe. In contrast, LG Energy Solution's business in North America and Europe is relatively balanced, accounting for about 30% and 20% of its business respectively.

According to financial data, in the first half of 2024, CATL's overseas business achieved revenue of 50.53 billion yuan, and its gross profit margin reached 29.65%, higher than the domestic 25.18%. Compared with the same period last year, CATL's overseas gross profit margin increased by 8.16%.

Although LG Energy Solution did not disclose the specific proportion of its overseas business, judging from its net profit performance, LG Energy Solution's expansion in the North American market has accelerated, and it has been more significantly affected by the U.S. IRA Act. According to data disclosed in its second quarter, IRA Act tax credits have more than tripled.

In the first half of 2024, when the overall growth rate of electric vehicles in Europe and the United States was lower than expected, although CATL's overseas revenue fell by 24.77%, its operating costs fell by 32.59%, making CATL's overseas gross profit margin better than expected.

In contrast, LG Energy Solution, which has mainly focused on business in Europe and the United States in recent years, has seen a downward trend in its overall net profit margin. In the second quarter data, LG Energy Solution also pointed out in a regulatory document that if it had not received some tax credits under the U.S. IRA Act, it would have incurred an operating loss of 253 billion won (1.33 billion yuan) this quarter.

Inferring from net profit, CATL's business expansion performance in Europe and the United States is better than LG Energy Solution.

As reflected in the power electric installation data, from January to May 2024, in the power battery installation market dominated by Europe and the United States, CATL grew by 11.4% and LG Energy Solution grew by 5.9%.

Whether in terms of installed capacity share in overseas markets or profit performance of overseas business, CATL has temporarily won the competition between the two leading battery manufacturers.

Energy storage business: joint efforts

The slowdown in the growth of new energy vehicles and the decline in the demand for power battery installation are important features of this round of cyclical changes in the lithium battery industry .

Therefore, more and more battery companies are focusing on the energy storage track. In terms of market growth potential, the growth of the energy storage market is no less than that of the power battery market. According to data from Gaogong Industry Research Institute (GGII), global energy storage battery shipments will exceed 250GWh in 2024.

The rise of the energy storage market has also prompted it to become the second growth curve for a number of lithium battery companies.

Against the backdrop of declining power battery revenue, CATL's energy storage business achieved counter-trend growth, reaching 28.82 billion yuan, and its share of total revenue increased to 17.3%. At the same time, based on the growth of the energy storage business, this year CATL launched the world's first 5-year zero-attenuation, 6.25MWh Tianheng energy storage system, which has a 30% increase in energy density per unit area and a 20% reduction in floor space compared to the previous generation of products.

LG Energy Solution also has ambitions for energy storage. Previously, LG Energy Solution said it plans to triple global sales of energy storage system products within five years. Currently, its ESS battery business has made a breakthrough, winning a 4.8GWh grid supply order in Arizona, USA, and providing integrated solution services including system integration (SI).

However, it is worth mentioning that the energy storage market structure has not yet been determined, and CATL's energy storage business tends to be oriented towards Europe, while LG Energy's energy storage business tends to be oriented towards the North American market. The two are in a stage of regionally differentiated development.

Competing in the lithium iron phosphate market

The shift from ternary batteries to lithium iron phosphate batteries heralds the success of China's power batteries and also opens up new changes in the global power battery technology route.

In recent years, driven by cost factors, global automakers have increasingly turned to lithium iron phosphate batteries. In the domestic market, the market share of lithium iron phosphate has stabilized at 70%, and CATL's installed market share of lithium iron phosphate has stabilized at more than 40%.

From the perspective of global market technology, the current situation in which ternary batteries dominate the market is changing. According to market forecasts, by 2030, the global market share of lithium iron phosphate batteries is expected to catch up with that of ternary batteries. On this basis, benefiting from the expansion of the energy storage market, the market share of lithium iron phosphate batteries is expected to further exceed that of ternary batteries.

Obviously, competition in lithium iron phosphate batteries is directly related to the market share of battery manufacturers. As the lithium iron phosphate market expands, the impact on the operating performance of battery companies will become more obvious.

As a result, CATL and LG Energy Solution continue to deepen their global layout of lithium iron phosphate batteries.

According to the latest disclosed information, CATL's German factory is ramping up, and the Hungarian factory has completed the capping and equipment commissioning of some factories. CATL has previously stated that it will produce lithium iron phosphate batteries for European and American customers based on its German and Hungarian factories, and the battery factory can also produce Shenxing batteries.

LG Energy Solution announced in 2023 that it would invest 3 trillion won (about 15.8 billion yuan) in Arizona to build a 16G Wh lithium iron phosphate battery production line, with the goal of mass production in 2026. In July this year, LG Energy Solution announced that it had signed a lithium iron phosphate power battery supply contract with Amere, an electric vehicle subsidiary of the Renault Group. According to the agreement, LG Energy Solution will provide Amere with approximately 39 GWh of lithium iron phosphate batteries from the end of 2025 to 2030, which is also its first large-scale order for lithium iron phosphate batteries.

However, from the perspective of the global customer structure, except for the Chinese market, there is a high degree of overlap between CATL and LG Energy Solution. Tesla , Volkswagen, Volvo, Renault and others are common customers of both parties. Based on the global shift to lithium iron phosphate batteries, the next battlefield between CATL and LG Energy Solution may be opened.