The unit price of battery cells fell below 0.5 yuan/Wh. Is a new round of price war looming?

OriginalSenior Engineer ObservationHigh-tech lithium battery2023-11-12 20:24Published in Guangdong

Under the price involution of the lithium battery industry, battery cell quotations continue to fall. 

Market data shows that as of November 7, the price of square lithium iron phosphate batteries used in energy storage and small power fell below 0.5 yuan/Wh , with the lowest closing price at 0.45 yuan/Wh , and the price of square ternary battery cells used in power closed at 0.54 yuan. /Wh . 

According to the price trend of finished battery cells this year, at the beginning of this year, whether it was ternary or lithium iron, the price per Wh of square battery cells was generally around 1 yuan. Now, more than three quarters later, the price of battery cells has dropped by nearly 50%.

This also reflects that as the contradiction between supply and demand in the industry transforms, industry price involution continues to advance. Especially since the beginning of this year, the industry's production capacity has been expanded on a large scale, and the crisis of overcapacity in the entire lithium battery industrychain has become a reality. In order to compete for market orders, lithium battery companies generally cut prices and sell goods. 

According to incomplete statistics from Gaogong Lithium Battery, the total expansion of the "power battery + energy storage" industry chain in the first half of 2023 reached 303.6 billion yuan. With the expansion of the industry chain and the release of production capacity, the production capacity under construction has greatly exceeded the actual market need. 

Behind the continued decline in the unit price of battery cells, the lower prices of the four main materials also played a key role. 

From the perspective of the composition of battery core cost, it is mainly concentrated in the four main materials of positive electrode material, negative electrode material, electrolyte and separator. 

Generally speaking, the cost of cathode materials accounts for more than 30%, the cost of anode materials and electrolytes accounts for 10%-20%, the cost of separators accounts for about 10%, and the total cost of the four main materials exceeds 60%. 

Market data shows that from the beginning of the year to now, the prices of the four major main materials have generally fallen by more than 50%. Upstream procurement costs and downstream price reduction demands have determined that battery cell prices continue to decline.

However, it is worth noting that the industry downturn driven by capacity expansion and falling material prices has also had a series of new impacts on the distribution of remaining profits throughout the industry chain.

Industrial profits have shifted downward. 

Battery cell quotations are mainly dominated by battery manufacturers. Judging from the procurement model of the lithium battery industry chain, in order to keep up with the rapidly changing market conditions this year, the format of monthly discussions is mostly adopted. 

Gaogong Lithium Battery has also previously analyzed that during the cyclical decline of the industry in 2023, there will be a certain transmission time difference between the selling price of end products and the cost of material procurement. Coupled with the oversupply of upstream materials, the industry's bargaining center will shift to the midstream and downstream. 

Behind the price of battery cells falling below 0.5 yuan/Wh, the profits of the industry chain are also being distributed to the midstream and downstream. 

From the perspective of sales gross profit performance, from the first quarter of this year to the third quarter of this year, the sales gross profit margin of the midstream lithium battery segment hassteadily increased. Among them, the sales gross profit margin of CATL increased from 21.3% in the first quarter to 22.4% in the third quarter. Yiwei Lithium Energy The gross profit margin of sales increased from 16.8% in the first quarter to 18.3% in the third quarter, and the gross profit margin of Funeng Technology increased from 1.9% in the first quarter to 5.1% in the third quarter. Not only battery companies , but also terminal new energy vehicle sales gross profit margins have increased . BYD's sales gross profit margins have increased significantly, from 17.9% in the first quarter to 22.1% in the third quarter; Guangzhou Automobile Group also increased from 4% in the first quarter. The sales gross profit margin increased to nearly 10% in the third quarter. GAC Group stated that this was mainly due to the growth in sales of its own brands including GAC Aian; Ji Krypton mentioned that this year's gross profit margin will shift from single digits to double digits. number. 

In contrast, the gross profit margin of upstream material sales has fluctuated sharply this year. The gross profit margin of most companies has fluctuated in a V-shaped structure . Defang Nano, Wanrun New Energy, and Longpan Technology once experienced negative gross profit levels in the second quarter. 

Comparing the sales gross profit margin of enterprises in different lithium battery industry chain links in 2023 with the sales gross profitmargin in 2022, we can further find that the gross profit margin of the lithium battery link has generally increased by 1-2 percentage points compared with 2022; the new energy vehicle link , the gross profits of leading companies such as BYD, Ideal, and GAC also increased. 

In contrast, in the materials sector, the sales gross profit margin of cathode materials has dropped from 15%-25% in 2022 to about 10% this year, and the gross profit margin of negative electrode materials has dropped from about 25% in 2022 to about 15% this year. The electrolyte's gross profit margin has generally fallen from over 30% in 2022 to around 20% this year, and the diaphragm segment's sales gross profit margin has also declined by about 5%. Overall, in the past, the profits of the industrial chain were mainly captured by the upstream links, and the gross profit margin of the upstream links was even more than twice that of the midstream and downstream links. This year's price war across the entire industry chain has not only put pressure on profits and capital chains, it has also led to a delicate balance in the profits of different links. 

After the unit price of battery cells exceeds 0.5 yuan? The battery cell quotation dropped from 1 yuan/Wh to 0.5 yuan/Wh. Where will the subsequent price go? Judging from past historical quotations, around 2009, the cost of a single Wh of battery cells was around 5 yuan. By 2019, the price of asingle Wh of battery cells had dropped to around 1 yuan.

Subsequently, due to abnormal fluctuations in the price of lithium carbonate, the cost of cathode materials and electrolyte-related main materials fluctuated. The cost of electricity per Wh of the battery core fluctuated between 0.5 yuan and 1 yuan. 

Taking into account the level of midstream and upstream integration, scale advantages and cost reduction factors brought about by technological transformation in recent years, it is not surprising that the price of battery cells has fallen below 0.5 yuan. Overall, the cost reduction of battery cells has also shown an accelerating trend. 

In addition, from the perspective of material costs and midstream and upstream profit margins, the price of lithium carbonate is far from returning to the level of less than 50,000 yuan/ton in 2019 and before. Compared with other manufacturing industries, in the mid-to-upstream lithium battery industry, the profit margins of the electrolyte and separator links are still relatively high. After the cost of battery cell materials has been readjusted, coupled with improvements in the chemical material system and physical structure system, the unit price of the battery cell has increased from 0.5 yuan/ Wh falling to 0.4 yuan/Wh, or even 0.3 yuan/Wh will be a trend. However, for now, there are two major uncertainties affecting batterycell quotations. 

The first is that after the reshuffle of leading manufacturers, companies around the waist and below are in poor condition. Recently, market news has spread that many companies plan to sell off their inventory of batteries in the fourth quarter. According to Gaogong Lithium Battery’ s tracking, from the first quarter to the third quarter, the industry’ s overall inventory dropped and the inventory turnover rate increased. At the same time, the concentration of leading manufacturers has further increased. However, for some companies at the waist and below, inventory clearance is not complete. The lithium battery industry has gone from the pain in the first quarter to the recovery in the third quarter. There are different perceptions between the head and the waist below the enterprises. 

The second is the direction of market expectations in the fourth quarter and 2024. Compared with 2022, a major feature is that downstream demand is not strong in the peak season in the fourth quarter. At the same time, as the beginning of 2024 approaches, the downstream auto market will usher in the traditional sales off-season. Under the squeeze of demand, some companies that originally hoped to clear their inventory in the peak season have once again formed inventory.pressure. The above two major factors may also lead to a new round of battery price war in the fourth quarter, and battery quotations may also reach new lows. 

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