In the lithium battery industry chain, lithium battery manufacturers always seem to be profitable
Recall that in 2022, lithium carbonate prices soared, lithium batteries became scarce, and prices surged. In 2022, battery manufacturers like BYD (SZ: 002594) and Contemporary Amperex Technology (CATL) (SZ: 300750) achieved historic highs in performance.
However, when lithium carbonate prices fell due to lower raw-material prices, lithium battery costs also dropped significantly, creating space for improving the gross profit margin and increasing profits.
The decrease in lithium carbonate prices acted as a double-edged sword. While it benefitted battery manufacturers by reducing costs, it also empowered them to initiate a new round of “price wars,” leading to a continuous decline in lithium battery prices in the market.
Data released by Bloomberg New Energy Finance recently showed that due to the drop in raw material prices combined with demand growth lower than industry expectations, global lithium-ion battery pack prices fell by 14% year-on-year this year, reaching a record low of $139 per KWH
The trend of lithium battery prices in China aligning with international trends has affected the profits of lithium battery manufacturers in China this year, evident in the noticeable decline in the third-quarter financial reports.
Data shows that in the third quarter of this year, the net profit of EVE Energy decreased by 2.53%, Gotion High-Tech’s net profit fell by 2.82%, and even CATL, which had a net profit of over 30 billion yuan in the first three quarters, saw a quarter-on-quarter decline of 4.28% in net profit in the third quarter.
To salvage declining profits, domestic battery manufacturers have taken various measures, primarily by extending their business upstream in the industry chain, accelerating vertical integration processes.
For instance, CATL not only acquires mines but also extends its business to upstream lithium mining operations. Moreover, it is involved in the midstream lithium battery materials sector and has achieved coverage in all four major materials (anode materials, cathode materials, separators, and electrolytes).
Looking at the entire lithium battery industry, the extension of upstream and downstream links is becoming more significant. Lithium salt manufacturers are also beginning to extend their business downstream into the industry chain.
With more and more companies investing in integrated industrial chains, this also implies that in almost every segment of the lithium battery industry chain, there will be a ruthless “The Hunger Games.”
Anyway, it’s time to welcome 2024, let’s see who is the winner in the lithium industry, at least this information is a good news for the renewable fields