CGS has released a research report stating that years of market cultivation and charging infrastructure development in China have fostered robust endogenous growth momentum. The marginal negative impact of subsidy reductions is diminishing. Against the backdrop of accelerated implementation of technologies like solid-state batteries and intelligent driving, long-term growth in the new energy vehicle market is promising, with exports and commercial vehicles being two key marginal changes to watch. Battery cells are initiating a new expansion cycle.
In Q1 2026, the industry's revenue reached 184.07 billion yuan, increasing by 49.8% year-on-year but decreasing by 7.6% quarter-on-quarter. Net profit attributable to shareholders was 22.5 billion yuan, up 47% year-on-year but down 5% quarter-on-quarter. High downstream prosperity continues to expand the market size. Current capacity utilization rates are pushed to high levels, and the release of new annual production capacity effectively supports upward earnings performance. The industry has passed its cyclical low point and is trending upward. Structurally, the competitiveness of leading companies' new and flagship products is favored. Under the wave of new technologies like solid-state and sodium batteries, leading companies' competitive advantages are evident, and their performance delivery is viewed positively.
The main views of CGS are as follows:
**Stable Growth in Power Batteries, Emphasis on Increasing Battery Capacity per Vehicle** 1) **China**: Years of market cultivation and charging network construction have established strong internal growth drivers. The negative impact of fading subsidies is decreasing at the margin. With technologies like solid-state batteries and intelligent driving accelerating, sustained long-term growth in the NEV market is anticipated. Exports and commercial vehicles represent two significant marginal shifts to monitor. 2) **United States**: Policy pullbacks significantly affect the U.S. NEV market. Coupled with factors like insufficient public infrastructure, U.S. sales may enter a period of sustained weakness. 3) **Europe**: Stricter carbon emission regulations, continued enhancement of national subsidy policies, and the ongoing launch of affordable models by automakers like Volkswagen and Renault will stimulate EV adoption, providing a floor for 2026 sales, which are expected to maintain growth of approximately 10-20%. 4) **Globally**, China remains the leader in electrification, while European growth becomes a highlight. Conversely, intense domestic competition is pushing Chinese automakers to explore emerging, high-growth overseas markets such as South America, the Middle East, and Southeast Asia, which hold significant potential. 5) **Battery Capacity per Vehicle**: Emphasis is placed on the multiplier effect from the increase in domestic battery capacity per vehicle. This cycle's upward trend is driven by technology atop an already massive base, combined with overseas markets catching up in electrification. Power battery growth of 10-20% in 2026 is viewed optimistically.
**Energy Storage Delivers Growth, Resonating Domestically and Internationally** 1) **Overseas**: Due to weaker grid infrastructure abroad, energy storage plays an essential role in integrating renewable energy. Existing renewable projects and integrated projects provide significant pull. Additionally, electricity shortages driven by the AI wave and power security needs in emerging regions are accelerating energy storage development. 2) **Domestic**: Factors like capacity pricing policies and decreasing battery cell costs are gradually building endogenous growth drivers for energy storage. Domestic installations and the bidding market are expected to consistently exceed expectations.
**Battery Cells Begin a New Expansion Cycle** In Q1 2026, industry revenue was 184.07 billion yuan (+49.8% YoY, -7.6% QoQ), with net profit attributable to shareholders of 22.5 billion yuan (+47% YoY, -5% QoQ). High downstream demand continues to expand the market. Capacity utilization is at high levels, and the release of new annual production capacity effectively supports earnings growth. Having moved past the cycle's trough, the industry is on an upward trajectory. Leading companies' new and flagship products are competitive. With new technology waves like solid-state and sodium batteries, leading firms hold clear advantages, and their performance realization is viewed positively.
**Focus on Price Elasticity in Materials Segment** 1) **Electrolyte & Related Segments**: Driven by demand, volume and price increases lead to significant earnings improvement. Current industry inventory remains low. Subsequent demand trends may offer further price increase opportunities, providing elasticity while maintaining earnings certainty. 2) **Copper Foil**: Lithium battery copper foil performance is expected to be sustained by strong demand from power and storage sectors. Electronic copper foil contributes elastic growth aligned with the AI trend. 3) **LFP (Lithium Iron Phosphate)**: Despite capacity expansion, utilization rates continue to climb. Rising processing fees improve profitability. Marginal changes from LFP demand warrant attention. 4) **Anode Materials**: Intensified competition has normalized profits. Cost pressures are building momentum for potential price hikes. 5) **Structural Components**: Stability is maintained. Leading structural component firms are actively entering the embodied intelligent component supply chain, exploring a second growth curve with promising potential. 6) **Separators**: Prices have bottomed and are recovering, with industry utilization rates rising, indicating a clear profit recovery trend. Overall industry supply and demand may quickly enter a tight balance.
**Risk Warnings**: Risks include lower-than-expected downstream demand for NEV sales and energy storage installations. Risks also involve significant raw material price increases or operational difficulties for companies due to shortages of resources or components.
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