Global Electric Vehicle Industry Research Report

Date: 2026-07-04 Industry Classification: Tech Hardware | Subject: BEV + Power Battery Supply Chain Coverage: Global (China / Europe / US / Emerging Markets)

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I1 Industry Definition and Scope

This report covers the Battery Electric Vehicle (BEV) and power battery manufacturing supply chain, with plug-in hybrids (PHEV) referenced as demand-side benchmarks. The supply chain spans: upstream critical minerals (lithium/cobalt/nickel/graphite) → midstream battery materials (cathode/anode/electrolyte/separator) → cell manufacturing → vehicle assembly. Excludes charging infrastructure, aftermarket, and commercial vehicles (only mentioned as incremental additions in the demand bridge).

The global EV industry is in the acceleration phase of the S-curve — global EV (BEV+PHEV) sales reached ~20.7 million units in 2025, with penetration of ~25%. However, there is a rare divergence between industry momentum and business quality: structural demand growth (global CAGR ~12.6% to 2030) coexists with severe supply overcapacity (battery nominal capacity/demand ratio >2.4x). Profits are migrating from cell manufacturing upstream to minerals and materials.

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I2 Demand: Structural Turning Point Confirmed, But Growth Slowing and Regional Divergence Widening

2.1 Global Demand Overview

Global EV (BEV+PHEV passenger) sales reached 17.2 million units in 2024 (+25% YoY), and ~20.7 million units in 2025 (+20% YoY), penetration rising from 20% to 25%. Three core volume drivers:

1. China Affordability: 2/3 of BEV models are now cheaper than comparable ICE vehicles. LFP battery pack costs fell to $70/kWh, making total cost of ownership (TCO) for EVs fully lower than ICE in China (IEA Global EV Outlook 2025).
2. EU CO₂ Emission Regulations: New 2025 rules force OEMs to increase EV rollouts; European sales rebounded +33% to 4.3 million units (IEA Global EV Outlook 2026).
3. Emerging Market Surge: Thailand EV penetration 27%, Vietnam 39%, Brazil doubling, benefiting from China’s low-cost EV exports (IEA GEVO 2026).

2.2 Structural Turning Point: Quantified

Global EV penetration has crossed the 16% threshold from Rogers' diffusion model — transition from "early adopters to early majority." Current 25% is in the mid-acceleration phase. Key turning-point drivers:

Turning-Point Judgment: Structural turning point quantitatively confirmed. However, note growth slowing in 2026-2027 (from +20% to +13-15%), with increased cyclical volatility.

2.3 Regional Penetration Divergence

Source: IEA Global EV Outlook 2025/2026; BNEF Electric Vehicle Outlook 2026; Rho Motion

Biggest Change: The US is the largest demand risk in 2026. After IRA §30D tax credit termination in Sep 2025, Q4 sales plunged; Q1 2026 down 27% YoY (Cox Automotive). BNEF has sharply reduced its 2030 US EV penetration forecast from 47.5% to 17%.

2.4 Power Battery Demand Bridge (2024 → 2028E)

2.5 Demand Growth Slowdown Signals

Global EV sales growth in 2026 is expected to slow to 13-18% (BNEF estimates 23.3 million units). China domestic passenger car retail in Jan-May 2026 was down 19% YoY (CPCA) due to economic slowdown + structural weakening of trade-in subsidies (proportional subsidy replacing fixed amounts; subsidy for low-priced cars dropping from RMB 20,000 to ~RMB 8,400), suppressing near-term demand. Deutsche Bank expects China passenger car wholesale in 2026 down 5% YoY.

Sensitivity Analysis: If global 2030 penetration reaches only 35% vs. base >40%, demand would be ~4 million units/year lower; if average pack capacity further declines to 58 kWh due to small-car trend, battery demand would drop an additional ~60 GWh/year.

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I3 Supply: Severe Overcapacity, Steep Cost Curve, China's Dominance Intensified

3.1 Global Battery Capacity

Global lithium-ion battery nominal capacity exceeded 4 TWh by end-2025 (IEA GEVO 2026), of which China ~2,500 GWh (62.5%), Europe ~251 GWh, North America ~150 GWh. However, a huge gap exists between nominal and effective capacity: global effective capacity utilization is only ~42.5% (1,700/4,000 GWh). At ~65% effective conversion, active capacity is ~2,600 GWh.

Key Judgment: Overcapacity is not uniform — CATL near full utilization, BYD >90%, while ~40% of China's nominal capacity is inefficient/zombie lines. The industry is undergoing a polarized deleveraging process of "leaders at full capacity, laggards idle."

3.2 Cost Curve: China LFP's Absolute Advantage

Source: SNE Research 2026; BNEF Battery Price Survey 2025; S&P Global Jan 2025; Fastmarkets BCI Oct 2024

LFP vs NCM spread >40%. China LFP cell spot price $53.6/kWh (TrendForce June 2026), already below overseas NCM marginal capacity's cash cost ($100-120/kWh), and far below the incentive price needed for new capacity (China LFP requires ~$80/kWh, overseas NCM ~$110-120/kWh to achieve 8% IRR). Meaning: new battery investment outside China is economically infeasible.

3.3 Sources of Cost Advantage

China's battery cost advantage (30-40% lower than overseas) comes from: ① integrated supply chain (CATL/BYD extending upstream into lithium salts/cathode/anode); ② scale (CATL single plant >80 GWh vs. overseas 10-30 GWh); ③ lower electricity/labor costs; ④ >95% domestic equipment localization rate. This gap is unlikely to be closed in the short term (2-3 years).

3.4 Technology Generational Migration

Source: EVreporter/GACO Report; Benchmark Mineral Intelligence; IEA GEVO 2026

Solid-state risk note: Korean/Japanese companies are accelerating catch-up — Samsung SDI targets 2027 for all-solid-state mass production, Toyota 2027-2028. If Korea/Japan achieve a breakthrough first, China's 2-3 year cost advantage window in liquid lithium-ion could be shortened.

3.5 Vehicle Manufacturing Capacity

China total passenger car capacity ~47.5 million units/year (2025), domestic sales ~23 million + exports ~6 million, capacity utilization ~60%. Among these, BEV line utilization diverges sharply: BYD >80%, new forces ~40-60%. The global auto industry is in a painful transition where ICE capacity retreat lags behind EV capacity expansion.

3.6 Key Raw Material Constraints

• Lithium: Lithium carbonate rebounded from a June 2025 low of RMB 59,900/ton to ~RMB 165,800/ton in July 2026 (+177%), driven by CATL's Jianxiawo mine shutdown and stronger-than-expected ESS demand. Global lithium supply-demand in 2026 is ~1.977 million tons LCE vs. 1.95 million tons demand, nearly balanced.
• Cobalt: The DRC implemented export quotas in Sep 2025 (annual cap 96,600 tons, ~half of prior monthly average exports). Cobalt price surged 160% to $26/lb.
• Nickel: Indonesia enacted a state-owned nickel export monopoly regulation (PP 24/2026) in May 2026, raising supply uncertainty.
• Graphite: China's export control (suspended until Nov 10, 2026); if reinstated, would disrupt global anode material supply.

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I4 Supply-Demand Balance and Price Cycle

This section is supporting. The headline of the Tech Hardware archetype is I5 Competitive Landscape and Pricing Power — the core conflict in batteries and vehicles is not total supply-demand, but pricing power distribution and profit allocation.

4.1 Yearly Supply-Demand Balance

Source: Based on IEA GEVO 2026, demand_analyst battery demand bridge, supply_analyst capacity data; effective capacity ≈ nominal × 65%

Core Conclusion: Nominal overcapacity severe (~2.4-3.0x demand), but effective overcapacity ~900-1,675 GWh. The key supply variable is not total volume but structure: CATL/BYD at full utilization (>95%) + low-end capacity idle (<40%). Regarding the deleveraging timeline, the red team noted that BNEF/CRU data shows most analysts expect overcapacity to persist at least through 2028. We accept this critique, postponing expectation of material supply-demand improvement from 2027-2028 to 2028-2029.

4.2 Price Cycle Position

Battery prices are in cyclic trough territory but not yet confirmed reversal. LFP cell $53.6/kWh is already below most overseas manufacturers' cash cost; cathode active material (CAM) segment continues to lose money. Lithium price rebound (+177% YoY) provides cost support, but overcapacity suppresses upward pricing power. Historically, when industry margins turn negative and persist for 12-18 months, a price floor typically forms. Currently at "late bottom consolidation phase."

4.3 Baseline Price Path (Next 12 Months)

Pricing Framework: Cost-support floor (China LFP cash cost $45-55/kWh) + overcapacity caps rebound + lithium carbonate cost pass-through (every RMB 1,000/ton change in lithium price ≈ cell cost change $0.018-0.021/kWh) + competitive landscape (CR3 concentration rising but low-end deleveraging slow).

Vehicle average price path: Global BEV average price fell from $77,000 (2024) to ~$58,000 (2026, -25%), expected to fall further to $50,000-56,000 in 2027, gradually approaching ICE avg (~$47,000), which could trigger penetration accelerating past the 30% critical threshold (EV Database; incorrys.com).

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I5 Competitive Landscape and Profit Pool (Headline Chapter)

5.1 Power Batteries: China Dominant, Concentration Rising

Global power battery (electrified vehicles) installed base CR3=64.8%, CR5=74.6% (SNE Research 2025 full year). Chinese company combined share rose from 67.1% (2024) to 70.4% (2025), with Korean/Japanese shares continuing to shrink.

Source: SNE Research, Full Year 2025

CATL: #1 globally for 9 consecutive years. 2025 installed capacity ~465 GWh (including ESS). Revenue RMB 423.7 billion, net profit attributable to parent RMB 72.2 billion (+42% YoY), gross margin 26.27%, operating cash flow RMB 133.2 billion. Capacity utilization 96.9% — running at full utilization amid severe industry overcapacity, confirming "winner-takes-all" dynamics.

BYD: #2 globally (16.4%), but batteries mainly for internal supply (FinDreams Battery), limited external supply. 2025 NEV sales ~3.97 million units (global #1, including PHEV), but 2026Q1 net profit down 55% YoY, significant impact from price war.

5.2 Vehicle Manufacturing: Chinese Brands Surging Globally

Source: CleanTechnica / EV Volumes; Company filings

Chinese brands are aggressively capturing global market share: CPCA data shows China NEV exports growing rapidly; BYD's overseas sales in 2026Q1 were +55% YoY. However, tariff walls are rising — US 100% tariff effectively blocks the market; EU countervailing tariffs of 17-35.3% raise selling prices.

5.3 Profit Pool: Cell Manufacturing Share Declining, Mid/Upstream Recovering

Source: Times Business Research/Tonghuashun iFinD; Share of net profit attributable to parent in China A-share lithium battery supply chain

Core Change: Cell manufacturing's share of total lithium-battery supply chain profit fell from ~96% (2024) to 52.2% (2026Q1), while mid/upstream (energy metals + battery chemicals) combined share jumped from ~2% to 45.7%. Drivers of profit migration: 2023-2024 saw more thorough capacity deleveraging in mid/upstream → supply-demand mismatch → lithium/cobalt/nickel price increases → profit flowing back upstream.

Vehicle manufacturing profit: Under price wars, only leading players (BYD, Tesla, Geely) are profitable; most new forces (NIO, XPeng, Leapmotor, etc.) and traditional OEMs' EV businesses are still losing money. China's overall auto industry profit margin is only 3.2% (2026Q1, National Bureau of Statistics), at unsustainable levels.

5.4 Profit Migration Direction (Next 2–3 Years)

1. Short term (2026–2027) : Profits continue migrating to upstream (lithium/cobalt mines) and midstream materials (lithium hexafluorophosphate/separators). The cell segment’s share continues to decline but remains the largest profit pool.
2. Medium term (2027–2029) : As new capacity comes online in the mid-to-upstream, profits may again concentrate in cell leaders (CATL) that possess technology moats and scale advantages. The vehicle segment is squeezed by both price wars and upstream pressure, making improvement difficult in the short term.
3. Long-term risks : Automakers’ self-developed batteries (BYD vertical integration, Tesla 4680, Volkswagen PowerCo) will gradually erode independent battery makers’ market share and pricing power.

5.5 Bargaining Power Across the Value Chain

• Battery makers vs. upstream mining : CATL has strong bargaining power through long-term contracts + equity stakes in mines + large-scale procurement to push down prices. However, it is passively exposed to resource-country policy risks such as DRC cobalt quotas and Indonesian nickel nationalization.
• Battery makers vs. downstream automakers : Battery makers CR3=64.8% vs. automakers CR5~48%, giving battery makers moderately strong bargaining power. But the trend of automakers self-developing batteries (BYD fully self-supplied, Tesla 4680, Volkswagen PowerCo) is eroding the position of independent battery makers.
• Key risk : Concentrated downstream customers (e.g., Tesla accounts for ~80% of Panasonic’s capacity, a single automaker accounts for ~10-15% of CATL) can capture supplier profit margins.

5.6 Industry Valuation Positioning

The overall industry valuation is in the middle-to-low range of the past 5 years (battery ~46th percentile), not clearly overvalued. But note: PE percentiles for cyclical stocks are distorted at peak earnings levels – CATL’s PE appears reasonable under its high 2025 profit base, but if profit growth slows (Q1 QoQ -10%), valuation support will weaken.

5.7 Return Quality Conclusion

The return quality of this business is overall "medium" – with severe structural divergence. Segments that earn real money: cell manufacturing leaders (CATL ROIC~25%, strong FCF), upstream lithium leaders (Tianqi/Ganfeng, huge profit surges at high prices). Segments with "growth illusion" (high value-trap risk): most second-tier battery makers (capacity utilization <60%, revenue growth without profit growth), most traditional automakers transitioning to EVs (loss per vehicle), and new-energy startups (burning cash for growth, not yet breakeven).

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I6 Policy · Geopolitics · ESG

6.1 Global Policy Environment: Structural Divergence, Net Negative Direction

Source: EU Council ST 10065/26; IRS; MIIT; White House Fact Sheet; German Federal Ministry for the Environment

Key geopolitical variables:

• China’s export controls on graphite/batteries suspended until November 10, 2026 – if resumed, would severely disrupt global supply chains
• DRC cobalt export quotas (annual cap of 96,600 tons) + Indonesian nickel export nationalization (PP 24/2026), pushing up upstream costs
• China–US–EU trade negotiations: sustainability of price commitment mechanisms, tariff policy direction after US midterm elections

6.2 ESG and Battery Regulation

The EU Battery Regulation is phased in: carbon footprint declaration from Feb 2025 → expanded to industrial batteries from Feb 2026 → mandatory battery passport from Feb 2027 → minimum recycled content from Aug 2027 (cobalt 16%, lithium 6%, nickel 6%). This poses compliance cost pressure on Chinese battery companies whose core advantage is low cost, benefiting EU, Japanese, and South Korean players with low-carbon production capabilities.

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I7 Core Debates and Scenarios

D1: When Will Battery Overcapacity Meaningfully Clear?

Our view: Capacity clearing will be a slow, non-linear process. The D1 bear argument is well-founded. We push back the expected material rebalancing from 2027-2028 to 2028-2029, and expect price recovery to be modest (LFP <$70/kWh) due to the ceiling from excess capacity.

D2: Has the Vehicle Price War Bottomed Out?

Our view: The price war is "marginally easing but far from over." Administrative orders are difficult to enforce substantively (price cuts can be disguised through equipment upgrades without raising prices), and weak demand (-19% domestic retail) makes price increases unsustainable. We expect average prices to still edge down for full-year 2026, stabilizing only in 2027.

D3: Will Chinese Battery Global Expansion Be Substantially Blocked by Tariffs/FEOC?

Our view: Accept the bear team’s criticism – FEOC is not a "bypassable" barrier but a substantive market closure. The US market is effectively closed to Chinese battery/vehicle companies through the triple mechanism of 100% tariff + 25% battery tariff + FEOC. However, other global markets (Europe / Southeast Asia / Latin America / Africa) remain open to Chinese companies, and the cost advantage ($50-60 vs. $100-130/kWh) remains effective outside the US market. Overall, the pace of Chinese battery global share expansion slows but the direction remains unchanged.

7.4 Three-Scenario Analysis

7.5 Catalyst Calendar

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I8 Investment Implications and Beneficiary Stocks

8.1 Growth Direction × Business Quality Decision Matrix

Interpretation of the lower-right value trap quadrant: New-energy startups (NIO/XPeng) are in "growth bullish × return poor" – industry total sales grow but individual companies keep losing money; the cash-burning growth model is unsustainable under intensifying competition. Second-tier battery makers similarly face "revenue growth but no profit growth" – capacity utilization <60%, net margins near zero or negative.

8.2 Beneficiary/Avoid Stocks

Relative beneficiaries (base scenario):

Avoid/cautious:

8.3 Scenario × Stocks

8.4 Key Risks

1. Continued weakness in China EV domestic demand: Jan-May 2026 retail -19%; if no improvement in H2, full-year sales could decline, dragging global growth.
2. Lithium/cobalt/nickel prices rise more than expected: If lithium breaks 250,000 yuan/ton, the battery cost reduction trend reverses, further squeezing automaker margins.
3. Solid-state battery disruption risk: If Samsung SDI in 2027 or Toyota in 2028 successfully mass-produces all-solid-state, China’s cost advantage in liquid lithium-ion could be caught up within 3-5 years.
4. EU tariffs expand to batteries: If the EU launches anti-subsidy investigation on Chinese power batteries and imposes tariffs, CATL/BYD overseas margins would face significant impact.
5. China export controls restart: If the graphite/battery export control suspension expires in Nov 2026 and is resumed, global supply chains would face severe disruption.

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This report is based on public information and industry research and does not constitute investment advice. Data cut-off date: 2026-07-04.