In January of this year, the new energy vehicle market saw a long-awaited good start, injecting a bright spot into the power battery market. In January, the production of power batteries reached 65.2GWh, a decrease of 16% MoM but an increase of 68% YoY. Sales reached 57.1GWh, a YoY increase of 72% but a QoQ decrease of 36.6%. The installed capacity reached 32.3GWh, a YoY increase of 100% but a QoQ decrease of 32.6%.
Although the production and installation volume of power batteries showed a decline MoM due to the traditional off-season, the YoY growth rate presented a significant upward trend, in sharp contrast to the decline in the same period of 2023, demonstrating a strong start to the off-season.
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<h2>1. The proportion of lithium iron phosphate batteries in exports surpasses that of ternary lithium batteries</h2>
In 2023, the prices of lithium iron phosphate batteries and ternary lithium batteries both showed a downward trend. However, in January 2024, there was a divergence in the price trends of lithium iron phosphate batteries and ternary lithium batteries. This also led to the continued expansion of the advantages of lithium iron phosphate batteries. After production, sales, and installed capacity, they also surpassed ternary lithium batteries in terms of exports.
The price of square lithium iron phosphate cells (power type) continued to decline, from 0.44 yuan/Wh at the beginning of the month to 0.43 yuan/Wh.
The price of square ternary lithium cells (power type), on the other hand, increased instead of decreasing, from 0.5 yuan/Wh to 0.51 yuan/Wh.
The cost changes of the two types of power batteries have further stabilized the dominant position of lithium iron phosphate batteries, and the proportion of lithium iron phosphate batteries has reached a new high. In January of this year, the production and installation volume of lithium iron phosphate batteries reached 42.4GWh and 19.7GWh, respectively, with a YoY increase of 60.7% and 84.2%, accounting for 65% and 60.9% respectively.
The production and installation volume of ternary lithium batteries reached 22.7GWh and 12.6GWh, respectively, with a YoY increase of 82.8% and 131.9%, accounting for 34.8% and 39% respectively.
The increased demand for lithium iron phosphate batteries from overseas new energy vehicle companies has led to its export proportion surpassing ternary batteries for the first time.
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In January of this year, the total export volume of power batteries reached 8.4GWh, of which the export volume of lithium iron phosphate batteries reached 4.2GWh, with a YoY increase of 96.2%, accounting for 50.5%, surpassing ternary lithium batteries for the first time. Compared with the export proportion of around 26% in 2023, it has nearly doubled.
In contrast, the export volume of ternary lithium batteries was only 3.9GWh, with a YoY decline of 26.4% and a decrease in export proportion from over 70% to 46.9%.
<h2>2. Pressure on leading and second-tier battery manufacturers, while leading manufacturers maintain growth momentum</h2>
The penetration rate of domestic new energy vehicles has reached 40% and is facing a slowdown in market growth. Against this backdrop, new entrants in the battery industry are gradually decreasing, and existing manufacturers are gradually exiting. Data from January 2023 shows that the number of battery companies supplying to vehicle manufacturers has decreased to 38, and the market share of tail-end manufacturers has dropped to 4.3%. At the same time, price wars have intensified, and second-tier manufacturers are facing losses. Competition in the industry is concentrating on leading companies. For example, Guoxuan High-Tech and Funeng Technology, both second-tier battery manufacturers, have started to incur losses.
(1) Funeng Technology
Funeng Technology is expected to incur losses for the full year of 2023, with losses increasing by 127.34% to 86.00% year-on-year. In the latest data for January, Funeng Technology has dropped out of the top 10 in terms of battery installation volume, with only 0.36GWh of battery installations, a MoM decrease of 63.6%. Market share has also continued to decline by 0.19 percentage points to 1.11%.
(2) Guoxuan High-Tech
Guoxuan High-Tech is expected to barely achieve a turnaround from losses to profits in non-GAAP net profit for the full year of 2023, with non-GAAP net profit estimated to be only 85 million to 120 million yuan. In January, Guoxuan High-Tech's battery installation volume was 1.56GWh, a MoM decrease of 22.8%. However, market share has finally managed to stop the downward trend that lasted nearly a year, with a MoM increase of 0.6 percentage points to 4.83%. It did not drop out of the top 5 in terms of battery installation volume.
In summary, only leading battery manufacturers are able to maintain a dual growth trend in market share and profitability. Taking CATL's excellent performance in January as an example:
CATL, which previously saw a frequent decline in market share in the domestic battery market, managed to stabilize its position in January.
CATL's domestic battery installation volume reached 15.96GWh, with a MoM increase of 4.93 percentage points and a YoY increase of 5 percentage points to 49.41%, reaching a high level in the past six months.
Huawei Research believes that CATL's significant increase in market share is mainly due to BYD's market share adjustment.
To achieve its sales target of 3 million vehicles, BYD overdrew some of the demand in January 2024 by implementing price promotions, resulting in only 201,000 new energy vehicle sales in January. Although this still represents a slight YoY growth of 33.9%, it has experienced a significant MoM decline of 41%. Therefore, BYD's battery installation volume in January was only 6GWh, with a MoM decrease of 4.37 percentage points and a YoY decrease of 15.54 percentage points to 18.68%.
In addition to the increase in market share, CATL's profitability far exceeds that of its peers. Despite the backdrop of a year-long price war, CATL is expected to achieve a net profit of RMB 42.5 billion to RMB 45.5 billion in 2023, a year-on-year growth of 38.31% to 48.07%.
Domestic battery manufacturers are already engaged in a fierce battle in the existing market. The erosion of profits caused by large-scale production and price cuts has already become evident in second and third-tier companies, and this situation may continue to spread.

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Following production, sales, and installation volume, the export volume of lithium iron phosphate batteries has also surpassed that of ternary lithium batteries.

The chill in the lithium battery market spreads to second-tier manufacturers | Insight Research