[SMM Analysis] Battery Cell Inventory at Safe Levels, Will Destocking Continue?

In June 2024, China's battery cell inventory was 173.43 GWh, down 1% MoM. As of the end of June 2024, the inventory-to-sales ratio of battery cells was 1.89 months, down 7% MoM from May 2024.

(1) NEV: As of the end of June 2024, China's power battery cell inventory reached 130.11 GWh, down 1% MoM. NEV sales performed well from May to June. Ternary power battery cells saw a slight inventory accumulation from January to April but began reducing production and destocking from May to June. By the end of June, the inventory-to-sales ratio of ternary power battery cells was 1.98 months, returning to a reasonable level. LFP battery inventory maintained a reasonable level due to strong end-user vehicle sales and a high production-sales match in H1. Overall, with the mid-year peak in car sales passing, EV battery shipments are expected to slow down in early Q3, leading to a short-term decline in production growth.

(2) Energy Storage: As of June 2024, energy storage battery inventory was 43.32 GWh, up 2% MoM from May. Due to strong market demand in June, shipments hit a record high, causing the inventory-to-sales ratio to drop to 1.74 months MoM. In June, a peak period for energy storage projects to connect to the grid, strong market demand led to a 13% MoM increase in energy storage battery shipments compared to May. Supply side, with demand remaining high, producers maintained high operating rates in June. Besides fulfilling existing orders, producers actively opened new production lines and improved the qualification rate of new 300+Ah energy storage battery cells. Overall, after the mid-year peak in grid connections, industry demand in early Q3 may slightly decline, with production and sales expected to decrease. Currently, energy storage battery cell inventory has dropped to a reasonable level, and producers are expected to be cautious about stockpiling and produce based on sales for the year.