SMM Analysis of China May Energy Storage and NEV Markets and June Forecast

Supply Side: In May, the demand from energy storage remained high, while the demand from NEV weakened, leading to a further decline in the MoM growth rate of battery cell production.
In May 2024, China's battery cell production was 98.05 GWh, up 3% MoM and up 22% YoY. By material, China's ternary lithium battery cell production was 27.91 GWh, down 2% MoM and up 13% YoY, while LFP battery cell production reached 65.18 GWh, up 5% MoM and up 30% YoY. SMM expects that in June 2024, China's battery cell production will be 93.52 GWh, down 5% MoM and up 8% YoY. It is expected that in 2024, the battery cell segment will still mainly schedule production based on sales, with current industry inventory reaching a safe and reasonable level, and production showing cyclical fluctuations following demand.

Demand Side: At the end of Q2 2024, the demand for the NEV market weakened, but the new demand for energy storage remained high. However, at the beginning of Q3, it is expected that the demand for both NEV and energy storage will be relatively weak.
(1) NEV Market: In May, NEV sales still achieved MoM growth, but the sales growth at the dealer level was significantly higher than that at the car manufacturer level, with limited new demand from car manufacturers. Due to the impact of mid-year sales boosts in June, many car manufacturers prepared battery cell material inventory in advance, leading to no significant decline in May's battery cell scheduled production. It is expected that in June, NEV sales will still grow MoM, but due to the high inventory of complete vehicles at the dealer level in the previous period, the demand for battery cell stocking will decrease, and the production of NEV battery cells will continue to decline. Additionally, due to the sanctions of increased tariffs on Chinese electric vehicles by Europe, it is expected that the number of NEVs exported to Europe will decrease in H2, thereby inhibiting the growth of demand for Chinese EV batteries.

(2) Energy Storage Market: In May, the energy storage industry continued to boom. This was mainly due to the mid-year grid connection rush in China and the recovery of large storage demand overseas, leading to a continuous increase in orders for energy storage battery cell companies and an overall increase in the industry's operating rate, which in turn boosted the production of energy storage battery cells. However, entering June, the peak period of concentrated procurement for grid connection in China ended, and orders for energy storage battery cells began to show signs of decline. Overseas, demand in the US energy storage market is expected to steadily rebound. In Europe, the overall installed capacity of energy storage declined YoY, and destocking is still ongoing.