On the last day of February, BYD released another "King Bombing". Following the Qin, Tang, and Han models, Song and Seal also announced the launch of the Glory Edition, and this intensified "price reduction wave" in the past few days seems to make follow-up BYD It has become a move that other car companies have to take.

and competition is not just between new energy vehicle companies. previously, the "same price of oil and electricity" has already brought great pressure to joint venture fuel vehicle manufacturers. this year's "electricity is lower than oil" will continue to erode the market of joint venture fuel vehicles. therefore, whether fuel vehicle manufacturers want to reverse their decline or new energy vehicle companies want to gain a firm foothold, price war is an important means for car companies to continue to attract customers and increase market share. All this may be as Huachuang Securities Research Report pointed out that "2023-2024 may be born will be recorded in the history of China's car market 'price war '".

But under the price war, the sorrows and joys of all parties are not the same.

there is still room for the "fire" of the price war in the car market to burn upstream batteries to reduce costs

The "roll" of the auto market, for consumers, means less prices and more choices, but for the upstream of the new energy vehicle industry chain, it is a "price reduction" released by downstream terminal car manufacturers. "signal.

Different from fuel vehicles, the main costs of the upstream of electric vehicles are batteries, motors and electronic controls. As the core of electric vehicles, batteries are also the largest cost, accounting for more than 40%. Therefore, "price reduction" is more reflected in lowering the price of batteries and forcing batteries to reduce costs in order to achieve the purpose of controlling costs.

in fact, except for car companies like BYD that started with batteries and can control the cost of batteries, other car companies need to bargain through business to lower the price of batteries. unlike previous years, because of the overcapacity of power batteries in China and the continuous decline in lithium carbonate prices, car companies have gradually mastered the bargaining power of batteries at the negotiation table this time.

However, the internal volume of battery enterprises is no less than that of automobile enterprises, and they carry out cost control from the dimensions of manufacturing, procurement and technology. According to relevant reports on the network, Ningde era is currently combing production line resources and promoting cost reduction. BYD's Fodi Battery also issued an internal notice urging cost reduction. In terms of cost reduction and efficiency increase in Honeycomb Energy's 2024 operating target, it is necessary to reduce manufacturing cost by 40% and procurement cost plus technical cost by 20%.

Honeycomb Energy Chairman Yang Hongxin said frankly at the 4th Battery Day, "I have also put forward requirements for some core suppliers. In 2024, we hope that the cost reduction of raw material procurement will reach 15%-20%. This pressure is very great, but we need to find a solution together, otherwise it will be difficult for the whole industry to survive in the competition".

in terms of battery cost reduction, some people in the industry also disclosed that there is limited room for manufacturing cost reduction, and the focus of battery cost reduction is still on procurement cost. there is still much room for material cost reduction in 2024. from the perspective of cathode materials alone, it is expected to drop to 30% in 2024. Thus, to the upstream price or will become the key words in the industry chain in 2024.

Under operating pressure, capacity clearance is still the main tone of the material factory

Cathode materials, electrolytes, anode materials, and separators are the four key materials for current lithium-ion batteries. The material factories of various sizes behind them are also electric vehicle manufacturers who want to lower prices and reduce procurement in the "price war". The main company of cost.

among them, cathode material factories mainly composed of lithium iron phosphate and ternary materials have to bear not only the trouble of price reduction, but also the impact of lithium salt price inversion. judging from the 2023 performance forecast or performance express recently released by many lithium battery cathode material enterprises, the net profit of dangsheng technology (300073.SZ) is expected to drop 11.45~18.09 year on year; rongbai Technology (688005. SH) net profit decreased by 56.17 YoY; Long-term Lithium (688779. SH) net profit loss of about 0.124 billion yuan; Wanrun Xinneng (688275. SH) net profit loss of 1.505 billion yuan. The performance of a number of positive materials companies has experienced varying degrees of decline or even losses due to fluctuations in raw materials.

in response to this decline, the relevant enterprises explained that "the sales prices of raw materials and products have fallen sharply, and the performance has declined accordingly". according to the data, battery-grade lithium carbonate plummeted almost all year round in 2023 until it fell below the 100000 key point, thus some Australian mining enterprises began to reduce production.

Industry insiders said that in 2023, the positive material industry competition is fierce, superimposed on raw material fluctuations, inventory backlog, in 2024, positive material manufacturers may continue to reduce production, still to consume their own inventory.

there are also electrolyte enterprises that are also in overcapacity and are affected by price fluctuations of raw materials. judging from the performance of leading enterprises in the industry, the net profit of tianci materials (002709.SZ) in 2023 was 1.9 billion yuan, down 66.61 from the same period of last year, the expected net profit of new zhoubang (300037. SZ) was 0.99 billion yuan to 1.05 billion yuan, down 43.70 to 40.29 from the same period of last year, and the same period of last year. However, some electrolyte enterprises in the waist have already suffered losses. For example, Yongtai Technology (002326.SZ) expects a net profit loss of 0.45 billion ~ 0.65 billion yuan in 2023, while Shenzhen Xinxing (603978.SH) expects a loss of 98 million ~ 147 million yuan in 2023.

as for the general pressure on the performance in the electrolyte field, tianci materials gave a detailed explanation in the performance bulletin: the decrease in gross profit per unit of electrolyte products led to a decrease in profits; The new production capacity of positive electrode material precursor iron phosphate products is slowly climbing, and the overall profit of the business is not as expected in the face of the continuous decline in market prices. Under the influence of large fluctuations in raw material prices and the market environment, the provision for inventory depreciation of lithium carbonate and cathode iron phosphate has increased, further affect the company's profits. In this regard, Tianci Materials has carried out lithium carbonate futures hedging in the fourth quarter of 2023 to cope with the impact of fluctuations in raw material prices.

the performance of the negative electrode material enterprise beteri (835185.BJ), which released the performance bulletin a few days ago, also declined. the reason is still the downward trend of product sales prices. in other words, it is also the compression of the overall negative electrode material enterprise profits by battery enterprises in order to protect their own profits.

Overall, upstream material plants such as cathode materials and electrolytes may still be under the dual operating pressure of high costs and low selling prices in 2024.

After the downward cycle, the head companies may show a significant increase in market share and earnings

Although the current materials industry still faces many challenges and has experienced varying degrees of performance decline, the cost advantages and scale effects of the head companies are still considerable, and it is worth noting that in the long run, the bottom of each cycle After that, the head companies and large-scale companies on the material side will show a significant increase in market share and profitability.

taking electrolyte materials as an example, tianfeng securities mentioned in its special research report released in April 2021 that after the bottom of the two new energy industry cycles, the market share of tianci materials has increased significantly. after the adjustment of the subsidy policy in 2018, it will quickly seize the market with a low price strategy and increase the market share. In 2020, the industry's electrolyte sector will be under pressure to make profits, accelerate the reshuffle of the industry, and further increase the market share. In addition, after the release of the "quality return double improvement" action plan, Soochow Securities also gave "considering that the company is at the bottom of the cycle, the future price recovery profit elasticity is greater, maintain the 'buy' rating".

It is worth noting that Soochow Securities mentioned in the electric vehicle 2024 strategy released in January this year that the current price of lithium hexafluorophosphate, the core raw material of the electrolyte, has fallen to the bottom range, and the third-tier manufacturers are already in a state of loss. The cost advantage of the leader is still significantly ahead of its competitors. And the market share after the cycle, Guoxin Securities company research report pointed out that the global lithium battery shipments are expected to 2024 1382GWh, year-on-year + 13%, corresponding to electrolyte demand of 1.5 million tons, 2024 Tianci materials global market share is expected to rise to 32%-34%.

in fact, the same is true for diaphragms. Guohai securities said in its report at the beginning of 2019 that after the subsidy policy was adjusted in 2018, the capacity utilization rate of a large number of enterprises in the diaphragm industry declined. Enjie shares (002812.SZ) took advantage of this initiative to reduce prices, resulting in general losses for small and medium-sized enterprises, while its wet diaphragm market share rapidly increased from 25.64 in 2017 to 35.13 in 2018H1.

In addition, Haitong Securities stated in its "Annual Review of Lithium Battery Materials" that although competition will become more intense in the future, under the effect of the market's regulatory mechanism of survival of the fittest, the industry leader still has a relatively certain expansion rate., Will rely on technological leadership and scale effects to obtain corresponding market competitive advantages.

as to when this next cycle will end and when the industry will return in spring, soochow securities also mentioned in its strategy for electric vehicles in 2024 that it is expected that the bottom will appear in the half year of 2024 and the bottom will grind in the second half of 2024. it is expected that some of the better links will take the lead in 2025, the industrial chain will continue to be strong and the plate will regain growth.