In recent years, driven by multiple favorable factors such as the explosive demand for new energy vehicles and national environmental policies, the lithium battery industry has developed rapidly. However, due to the impact of the epidemic and rising raw material prices, the profitability of the lithium battery industry has declined. However, with the rapid development of new energy vehicles and the increase in intelligent consumption in daily life, the application scenarios of lithium batteries will become more diverse, and the next 10 to 15 years will be their golden development period.

         Industry profitability decline

         Affected by national environmental policies, the lithium battery industry is experiencing rapid development. According to statistics from the GGII Lithium Battery Research Institute, from 2017 to 2021, the shipment volume of lithium batteries in China has been continuously increasing, maintaining a double-digit growth rate every year. Among them, the proportion of shipments of automotive power batteries continues to rise, accounting for 69% of the national lithium battery market in 2021, far exceeding other application terminals.

         Although the lithium battery industry continues to grow rapidly, its profitability has been declining in the past two years due to factors such as the pandemic and rising raw material prices.

         On the one hand, the rise in raw material prices has a significant transmission effect on the lithium battery industry. According to the financial report of CATL, in the first quarter of 2022, although the company's operating revenue of 48.678 billion yuan far exceeded the same period last year, due to the rapid rise in upstream raw material prices, the company's operating costs increased by 198.66%, and net profit decreased by 23.62% year-on-year.

         Established in 2003, Xingheng Power is one of the major manufacturers of power lithium batteries in China, with a domestic market share of nearly 45% for its light vehicle lithium batteries. It is reported that the company's sales revenue was around 4 billion yuan in 2020 and 2021, with good profitability, but there was a slight decline in the first half of this year.

         Industry insiders say that under the regulation of market supply and demand, the price of lithium carbonate, a raw material in the upstream of the industry, has been fluctuating between 30000 and 200000 yuan per ton. But this year, the price of lithium carbonate soared to around 500000 yuan per ton, greatly exceeding the cost bearing range of lithium battery companies.

         On the other hand, the consumption of new energy vehicles is becoming increasingly mature and is entering an explosive period in 2021, with market demand jumping from around 1.2 million vehicles in 2020 to around 3 million vehicles. But the upstream and downstream enterprises in the industrial chain are not well prepared, and the supply cannot keep up.

         The future will usher in a golden period of development

         Despite encountering temporary setbacks, the opportunities in the lithium battery industry are still enormous, and the next 10 to 15 years will usher in a golden period of development.

         According to data from the National Association of Automobile Manufacturers, the sales of new energy vehicles in China reached 2.733 million units from January to July this year, a year-on-year increase of 121.5%.

         Industry analysts believe that although the wave of price increases and the epidemic objectively have had a certain impact on the production and sales of new energy vehicles, they are only short-term factors that disturb the market and overall will not reverse the upward trend of new energy vehicle production and sales.

         The lithium battery industry needs to seize the dividends released by new energy vehicles, "said Feng Xiao, President of Xingheng Power." The entire industry chain, including the lithium battery industry, needs to find the right positioning and do a good job in market planning. Xingheng Power has established a new energy vehicle lithium battery production base in Yancheng, with a product positioning of new energy vehicles with a range of less than 300 kilometers and a price of less than 150000 yuan. It is expected to be put into operation next year.

         Driven by the consumption of new energy vehicles, more and more products will use lithium batteries as power. Feng Xiao stated that in the future, products in various aspects such as clothing, food, housing, and transportation will become increasingly automated and intelligent. The application scenarios of lithium batteries will also become more diverse, and the industry will usher in an explosive period.

         However, as the popularity of the lithium battery industry continues to rise, this track has become increasingly crowded.

         In the next 3 to 5 years, there may be a large number of lithium battery companies being reshuffled, "Feng Xiao said. The lithium battery industry has a high technical threshold, and there have been few universities in China that offer related majors. There is a shortage of technical talents with professional backgrounds, and" it is not enough to survive just by copying homework. "Without core technology, independent strategic deployment, and competitive differentiated products, it is difficult to develop in the industry for a long time.