[SMM Analysis]LFP Pulls Further Ahead, Ternary Stays Under Pressure — August EV Battery Output Marks Year's Widest Split

China's total EV battery cell production grew approximately 11-12% month-on-month in August 2026, accelerating from July's growth of around 10%, as the industry ramps up production schedules ahead of the traditional "Golden September and Silver October" peak sales season. By technology route, LFP (lithium iron phosphate) EV battery cells surged 14.0% MoM, while ternary (NCM) cells grew only 3.6% MoM — the widest divergence between the two routes so far this year.

The LFP surge was driven by three converging forces. First, the concentrated release of capacity following the completion of production line upgrades at leading cell makers was the largest marginal contributor this month — retrofit programs for legacy lines, exemplified by BYD's second-generation Blade Battery conversion, were largely wrapped up by end-June, with effective capacity ramping progressively from July and entering a full-volume phase in August. Second, with China's battery consumption tax officially taking effect on September 1, the new 2% levy prompted cell makers and automakers to pull forward some September-October orders into August production, creating a "pre-tax stockpiling" window. Third, manufacturers raised overall operating rates to build inventory ahead of the peak season. Notably, the industry's inventory-to-sales ratio currently stands at just around 1.3 months, a relatively low level.

The weakness in ternary cells reflects structural issues in the premium segment. Underwhelming sales of premium extended-range electric vehicles (EREVs) directly dampened demand elasticity for ternary cells. Meanwhile, ample inventory built up in earlier periods led producers to deliberately slow their August output to destock. Over a longer horizon, the ternary route faces a two-way squeeze from LFP and LMFP (lithium manganese iron phosphate): LFP's share has climbed from 66% a year ago to 76%, while LMFP is substituting mid-nickel ternary chemistries in the mid-range market, leaving ternary with rigid demand only in premium pure-electric models and export vehicles.

At a deeper level, this month's data confirms three industry trends. First, the growth engine has shifted from "volume expansion" to "structural rotation" — LFP continues to erode ternary's market space on the back of surging commercial vehicle installations (commercial vehicle battery installations doubled YoY in July), maturing high-capacity fast-charging technology, and cost advantages. Second, policy milestones are exerting an outsized influence on production scheduling, with windows such as the consumption tax rollout and the year-end cancellation of export tax rebates reshaping manufacturers' production calendars. Third, capacity released through technical upgrades — rather than greenfield construction — has become the main source of supply-side increments, signaling that industry capital expenditure has entered a more disciplined phase.

Looking ahead, EV battery cell output is expected to climb further as the annual peak sales season begins and the commercial vehicle market sustains its rapid growth. September production schedules are projected to rise around 8% MoM, with LFP cells up 10.8% and ternary cells down 1.2% — LFP will remain the volume leader while ternary stays under near-term pressure. That said, caution is warranted: the "pre-tax production rush" effect will gradually fade after the consumption tax takes effect, and monthly output growth is likely to moderate to mid-to-low single digits from October onward, at which point the true strength of end-market demand will be put to the test.