On September 1, Caixin News (reporters Zeng Chuchu and Liu Yue) reported that with the continuous decline in the price of upstream raw material lithium carbonate in recent years, the pressure of price wars in downstream car companies has led to the internal circulation of power batteries becoming an industry consensus. After the frenzy of expansion, a new round of industry 'elimination competitions' is almost imminent.

There is a structural oversupply in the current power battery industry, and there is a fierce price war in the industry chain. At this time, Zeng Yuqun, CEO of Contemporary Amperex Technology (300750.SZ), and other industry leaders gathered at the 2024 World Battery Conference, where Zeng Yuqun called for the power battery industry to enter a high-standard development stage, put competition aside, and prioritize safety.

Fang Yunzhou, Chairman of Nezha Autos, stated in an interview with Caixin News and other media outlets that overall, the automotive market is still in a downturn, and the intense price war has caused the industry to enter into a 'kill each other' stage.

Power batteries account for about 40% of the total vehicle cost, and the pressure of price wars among car companies will also be transmitted to power battery manufacturers. Taking the leading company Contemporary Amperex Technology as an example, according to data from the Power Battery Alliance, the company's domestic power battery market share has increased by 3 percentage points to 46.4% in the first half of 2024 compared to the previous year. While market share has increased, Contemporary Amperex Technology's revenue has declined. As of Q2 this year, the company's revenue has declined year-on-year for three consecutive quarters.

Under intense competition, safety issues have become a focus of attention in the industry. At this conference, Zeng Yuqun, Chairman of Contemporary Amperex Technology, stated that the safety factors of the majority of batteries on the market are far from sufficient. Many products claim to have a safety failure rate of PPM level (i.e. one in a million), but in reality, the safety failure rate is at the level of one in a thousand. Zeng Yuqun cited a CCTV report, stating that the fire rate of new energy vehicles in 2023 was 0.96 per 10,000. With the domestic stock of new energy vehicles exceeding 25 million and the billions of cells being loaded, if the safety issue is not resolved, the consequences will be disastrous.

"The industry should put competition aside, prioritize the interests of consumers, especially prioritize everyone's safety, and jointly raise safety standards to establish an absolute safety red line." Zeng Yuqun stated that the power battery industry must enter a high-standard development stage, and the first focus should be on high safety, which is the lifeline of the industry's sustainable development. Battery safety is a complex system engineering, which runs through the entire process of battery material development, cell design, system integration, and user utilization.

Regarding the cost reduction of lithium batteries, Meng Xiangfeng, Vice President of Contemporary Amperex Technology, stated in a high-level dialogue at the conference that the period of rapid decline in the cost of lithium batteries is over. In the future, with no major fluctuations in raw material costs and mining costs, there is still room for the cost reduction of lithium batteries through technological advancements, process improvements, and the integration of the industrial chain. With the reduction in costs, the application scenarios will further expand.

In addition, when it comes to how to view the issue of overcapacity in the power battery industry, Miao Wei, a member of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC) and Deputy Director of the Economic Committee, stated at the opening ceremony that he believes that moderate overcapacity is a common phenomenon in competitive industries under market economy conditions. Only with overcapacity can there be competition, and only with competition can there be effects and a market. The direction of electrification is an unstoppable trend that no one can block. We cannot measure capacity utilization with static indicators, because the numerator is the current sales volume and the denominator is the capacity for future development and construction. We cannot view the development of emerging industries through the lens of traditional industries.