[SMM Analysis] European Sales Forecast Was Downgraded, Ternary Batteries Underperformed LFP Batteries

The EU announced tariffs on Chinese electric vehicles, but due to higher manufacturing costs in Europe, the European sales forecast has been downgraded.

In April, global new energy vehicle sales were 1.15 million units, down 10% MoM, with European sales significantly lower than expected. It is expected that global car sales will resume a stable growth trend in May after a decline at the end of Q1, preparing for a mid-year surge. In the Chinese market, due to the trade-in subsidy policy introduced at the end of April, May car sales increased by 12%. In Europe, the mid-June announcement of tariffs on Chinese electric vehicles impacted Chinese exports but benefited local car manufacturers. However, the high local manufacturing costs mean that the European market is unlikely to see much improvement in H2. SMM has downgraded the European sales forecast for 2024 to 3.02 million units, up only 5% YoY from 2023. The US annual sales still meet previous expectations.

Price cuts for models powered by LFP batteries stimulated sales, while ternary battery installed capacity has declined for several months.

Starting from Q2, amidst price wars among car manufacturers, price cuts for models powered by LFP batteries have been more common. With rising raw material prices, the cost advantages of LFP are once again reflected. Therefore, the market share of LFP surged. Starting in H2, the models powered by 6-series ternary batteries are expected to drive an improvement in ternary installed capacity.

In terms of costs, with the continuous rise in the prices of main lithium battery materials in May, the costs of both ternary and LFP battery cells increased. According to SMM, on June 7, the cost of prismatic LFP battery cells was 0.41 yuan/Wh, and that of NCM523 ternary cells was 0.50 yuan/Wh, with the cost gap widening to 0.09 yuan/Wh. Although the manufacturing costs slightly increased in May, battery cell prices are expected to dip slightly amid weak demand expectations.