Dongwu Securities: Strong demand, price flexibility can be expected, electric vehicles start a new cycle

The Zhitong Finance App learned that Dongwu Securities released a research report saying that with energy storage support, demand in the lithium battery industry increased by 32% in '26, and can still maintain more than 20% in '27. The supply and demand pattern will improve markedly, and prices can be expected to recover reasonably in all areas. Moreover, the current valuation of mainstream companies is less than 20x in 26 years, continuing to push leading battery companies with stable patterns and profits, and leaders with flexible price increases and high-quality lithium battery materials; at the same time, the price of lithium carbonate has bottomed out, and they are optimistic that they have high-quality resource leaders. In terms of new technology, solid-state industrialization is accelerating.

The main views of Dongwu Securities are as follows:

Domestic sales are expected to increase 15% in '26, and sales in Europe will continue to grow at a high rate. The world is expected to grow by 14%. Considering the increase in charging capacity, power batteries are expected to maintain 20% growth

Domestic automobile consumption policy continued in 25 years+strong preinstallation+exports before the decline in purchase tax. Purchase tax is expected to rise 30% to 16.76 million units in the year 26. Demand for Q1 is expected to be pressured in the short term, and the bank expects to continue to release trade-in subsidies “after two meetings” in '26, which is expected to support 26 years of sales, compounded by strong growth in heavy trucks+exports. Sales of new energy vehicles are expected to increase 15% in 2026. The decline in European subsidies has been digested. Combined with the new car cycle starting at 25H2, it is expected to grow 34% to 3.94 million vehicles throughout the year. Market policies in Britain, Italy, etc. were strengthened in '26, compounded by new car incentives, and it is expected to maintain 30% growth. Uncertainty in the US has increased, short-term demand has slowed, and new models have been postponed. Sales growth is expected to slow to 4% in '25, subsidies will be completely withdrawn in '26, and sales are expected to drop 10% year-on-year. Other regions are expected to increase by 50% + in 25, and are expected to maintain nearly 50% growth in '26. Therefore, in '25, the bank expects global sales to reach 21.5 million units, an increase of 25%. In '26, global sales of new energy vehicles are expected to be 24.53 million units, an increase of 14%. Considering the increase in domestic vehicle size and the share of special purpose vehicles, power battery demand is estimated to be 1,704 GWh, an increase of 19.5%.

The explosion in the energy storage market opened up room for growth. Demand for lithium batteries was revised to 30% + growth in '26, continuing to exceed market expectations

The bank expects global energy storage battery demand to be 611 GWh in '25, an increase of 86%. In '26, global energy storage demand is expected to rise to 64%, or nearly 1000 GWh. Looking at the subregion, domestic electricity prices+business model innovation. The bank expects the domestic market to grow 64% in 25 years and 71% in '26; Europe and emerging markets will blossom more, and large reserves will continue to double; and US AI will spawn new demand. As a result, global power storage demand is expected to increase by 45% in 2028 GWh in '25. Global demand for moving storage is 2,600-2,700 GWh in '26, an increase of 30% +, and can still maintain 20% + growth in '27.

The industrial chain is not weak in the off-season, price increases can be expected to continue, and profit flexibility is high

The supply of energy storage batteries is in short supply. Production in December remained flat and increased slightly from month to month. The off-season in the first quarter of next year will not be easy. It is expected to drop by only a single digit from month to month. Leading guidelines remain flat month-on-month, demand continues to exceed expectations, and supply and demand in the lithium battery industry has reversed. On the battery side, demand for energy storage has exceeded expectations. The industry's capacity utilization rate has remained 90%, and prices have risen by 1-3 points/wh. The subsequent rise in lithium carbonate and material costs is expected to be smoothly transmitted; in terms of materials, 6F and VC prices have greatly exceeded expectations, and loose orders are expected to rise within 6F. Prices of loose orders such as lithium iron, anodes, diaphragms, aluminum foil, etc. have risen. The bank is expected to land one after another for 26 years, and profits will recover reasonably.

Solid-state battery technology focuses on sulfides, accelerates industrialization, benefits electrolytes and core equipment, and focuses on the iteration of solid-state technology

Industrial progress is progressing steadily. Small tests were completed before the end of 25 years+vehicle grade batteries went offline; 100 Mwh pilot line optimization+prototype road test in '26; small-scale mass production+loading demonstration operation in '27. The technology focuses on sulfides. The core materials are the solid electrolyte lithium phosphorus sulfur chloride and its raw material lithium sulfide. The process barriers are high, and the price is as high as 3 million/ton, which is one of the bottlenecks in mass production. Second, on the equipment side, the value of the entire line has increased by 2 times. The core equipment is dry electrode equipment, integrated film forming machines, and isostatic pressure equipment. There are large differences in manufacturer technology, and binding to a leading battery can speed up technical iteration. At the same time, new solid-state materials and processes are constantly being iterated, and attention can be paid to lithium-rich manganese-based cathodes, lithium metal anode evaporation processes, and novel fluid collectors and additives.

Risk warning: Increased competition, changes in policies that exceed expectations, renewable energy installations fall short of expectations, and insufficient supply of raw materials.