January 27, 2026 02:41 AM GMT Contemporary Amperex Technology Co. Ltd. | Asia Pacific Material Inflation is Hurting Real Demand Key Takeaways Exhibit 1: LFP cell material BOM cost Other materials Electrolyte Copper foil Aluminum foil Rmb/kWh LFP cathode Anode Separators End 3Q25 Now 350 300 250 200 150 100 50 - 29.00 30.00 30.25 28.10 72.48 56.82 25.30 15.40 18.70 17.00 22.00 19.00 138.23 80.50 framework * = GAAP or approximated based on GAAP Source: Wind, SMM, Morgan Stanley Research | M | | | | --- | --- ...

Summary of Key Points from the Conference Call on China Battery Materials Industry Overview - The focus is on the battery materials industry, particularly related to lithium iron phosphate (LFP) batteries and the broader electric vehicle (EV) market - The analysis includes the impact of rising costs on battery manufacturers and the implications for downstream demand, especially in energy storage systems (ESS) [1][2][9] Core Insights and Arguments - **Price Trends**: LFP battery cell prices have increased by 8%, while battery costs have surged by 30%, leading to a squeeze in battery margins [1] - **Cost Inflation**: Lithium prices have risen by 46% year-to-date, contributing to an estimated cost inflation of Rmb32/kWh for batteries. The total LFP battery cost has increased by Rmb80/kWh, which may test demand in the coming months [2][11] - **Demand Forecasts**: Battery production guidance from major manufacturers like CATL suggests a growth of 50-70% by 2026, which has raised expectations for raw material demand [3][21] - **Market Dynamics**: The recent surge in costs has shifted the market from a demand-pull to a cost-push scenario, with concerns about EV sales weakness impacting performance [1][9] - **Cost Pass-Through Mechanisms**: Battery manufacturers have mechanisms to pass on metal-linked cost increases to downstream customers, but non-metal cost increases may not be fully passed through [20] Important but Overlooked Aspects - **Investment in Upstream**: Companies like CATL and Gotion are investing in upstream lithium resources to mitigate the impact of rising raw material costs. CATL's self-sufficiency ratio for lithium is expected to be 18% by 2025 [17][18] - **Profit Distribution**: The profit distribution along the battery supply chain is shifting, with downstream manufacturers currently capturing more profit. However, this may change as the market matures and supply chain efficiencies improve [35] - **Policy Impacts**: Changes in Chinese government policy, including export controls and a focus on price recovery, may influence the battery market dynamics and cost structures in 2026 [36] Financial Metrics and Projections - **Battery Demand Growth**: The forecast for total battery demand is projected to grow significantly, with EV battery demand expected to reach 2,096 GWh by 2026, reflecting a 30% year-over-year growth [23] - **ESS Demand**: ESS battery demand is also expected to grow, with projections of 894.5 GWh by 2026, indicating a robust market for energy storage solutions [26] Conclusion - The battery materials industry is facing significant challenges due to rising costs and potential demand weaknesses. However, strategic investments in upstream resources and favorable production guidance from major manufacturers present opportunities for growth. The evolving landscape of profit distribution and policy impacts will be critical to monitor as the market develops.

1月27日，市场监管总局发布了2025年综合整治"内卷式"竞争十大重大案件： 一是查处"莆田来啦"连锁企业侵犯注册商标专用权案。通过组织全国性、跨区域集中执法行动，成功摧 毁隐蔽性强、规模庞大的体系化制售假网络，有效遏制相关行业通过侵权假冒进行低价恶性竞争的"内 卷"问题，推动建立以尊重知识产权和鼓励创新为基础的良性竞争生态。 五是查处山西老葛商贸有限公司虚假宣传、价格欺诈系列案。依法查处当事人通过直播平台为合作方不 当推广营销商品等违法行为，累计罚款560万元，有力遏制利用直播营销进行不正当竞争的行业乱象。 六是查处苗古金贴（厦门）大药房有限公司发布违法广告案。依法查处当事人利用AI技术虚构"非遗传 承人"形象进行虚假宣传，并伴有"刷单炒信"等违法行为，有力打击了技术手段新、社会危害面广的新 型违法广告，遏制了利用违法广告进行"内卷式"竞争的市场乱象。 七是查处海南环城电线电缆有限公司销售不符合国家标准的电力电缆产品案。依法查处企业销售不合格 产品的违法行为，严厉打击通过降低质量、以次充好换取市场份额的恶性竞争，严守重点工业产品质量 安全底线。 八是查处何某某虚假宣传案。依法对当事人通过私域营销实施食品违法 ...

Core Viewpoint - Sodium batteries are emerging as a viable alternative to lithium batteries, marking a significant step in energy restructuring, with a focus on large-scale promotion and commercialization [2]. Group 1: Sodium Battery Development - CATL's sodium battery has achieved its first mass production application in the light commercial vehicle sector with the launch of the Tianxing II series [2]. - The sodium battery sector index surged by 3.32% on the second trading day after CATL's announcement, reaching a new high since May 2021, with a cumulative increase of 62% since the brand's launch [2]. Group 2: Advantages and Challenges - Sodium batteries have advantages over lithium batteries, including easier resource availability, better low-temperature performance, higher safety, and minimal temperature rise during high-rate charging [3]. - Current challenges for sodium batteries include industrialization costs, maturity of the supply chain, and energy density, which are still inferior to lithium batteries [3]. Group 3: Future Applications and Market Potential - CATL plans to achieve parity with lithium batteries in terms of economic viability and energy density within three years, with a focus on real-world applications [3]. - The sodium battery is expected to see widespread application in various sectors, including commercial vehicles and energy storage, by 2026, indicating a dual development trend alongside lithium batteries [3]. - The Aion UT Super, a collaboration between JD.com, GAC Group, and CATL, is set to launch a sodium battery version in the second quarter of this year [4]. - By 2030, the expected shipment volume of sodium batteries in both automotive and non-automotive sectors could exceed 100 GWh, with potential cost reductions of over 30% compared to lithium iron phosphate batteries as supply chain capacities improve [4].

Group 1: Technological Advancements - Shandong Province has seen significant growth in high-tech product output, with integrated circuit wafers increasing by 19.2%, lithium batteries by 103.1%, industrial robots by 26.6%, and over 1.1 million new energy vehicles produced [1] - The government report emphasizes the importance of technology innovation and industrial innovation integration, forming a "dual spiral" to support high-quality development [1] Group 2: Industrial Development - Shandong, as a major industrial province, prioritizes industrial economy, aiming to enhance the quality and sustainability of its industries, with over 40% of advanced capacity in key sectors like steel and petrochemicals [2] - Key projects such as the East Ming Petrochemical and East Ying Fuhai are highlighted, with a goal for high-end chemical revenue to reach around 60% [2] Group 3: Semiconductor Industry - Shandong Xingtai Silicon Material Technology Co., Ltd. produces electronic-grade silane with a purity of 99.9999%, addressing critical supply issues for integrated circuit gas materials [3] - The government report calls for the improvement of the semiconductor chip industry ecosystem, focusing on the project's impact on the industrial chain [3] Group 4: New Energy Sector - The production of a 160GWh battery base by CATL in Jining has attracted 23 supporting enterprises, indicating a strategy to cultivate a robust new energy industry [4] - The government aims to concentrate resources to develop four trillion-level emerging pillar industries, including new energy [4] Group 5: Commercial Aerospace - Shandong has developed a commercial aerospace ecosystem with a focus on sea launch capabilities and satellite manufacturing, establishing a strong industrial layout across multiple cities [5] - Proposals to enhance the commercial aerospace industry include innovative business models and support for leading enterprises in the industry chain [5] Group 6: Digital Transformation - The government report proposes the establishment of a provincial-level digital economy innovation development pilot zone to promote digital integration [6] - Shandong Steel Group's collaboration with a supercomputing center led to significant improvements in production processes, generating over 10 million yuan in annual economic benefits [6] Group 7: Support for SMEs - Qingdao has successfully promoted digital transformation among 614 SMEs in key manufacturing sectors, achieving high digital maturity levels [7] - The city aims to shift SMEs' mindset from reluctance to embrace digitalization to actively seeking its benefits through various supportive measures [7]

Core Insights - The article highlights the economic potential and growth of Luoyang, showcasing three major companies: Luoyang Molybdenum, AVIC Optoelectronics, and CATL, which are leading in resource, high-end manufacturing, and new energy sectors respectively [6][8][9]. Group 1: Company Performance - Luoyang Molybdenum achieved a profit exceeding 20 billion yuan and became the first A-share listed company in Henan to surpass a market value of 500 billion yuan, marking a successful global expansion for resource-based enterprises [6][9]. - AVIC Optoelectronics reported revenue exceeding 15.8 billion yuan in the first three quarters of 2025, establishing a strong position in the connector industry with significant technological barriers [6][8]. - CATL's Luoyang base has generated a cumulative output value exceeding 17.5 billion yuan since its inception, supported by a total investment of 32 billion yuan, contributing to the restructuring of the regional industrial ecosystem [6][8]. Group 2: Technological Innovation - Luoyang Molybdenum's digital transformation includes an AI blending system that reduced raw material waste from 15% to 3%, saving the equivalent of a small mine's output annually [9]. - AVIC Optoelectronics has diversified its product range from two types of aviation connectors to over 500 series, demonstrating resilience against market fluctuations through product diversification and scenario expansion [10]. - CATL's investment in a "lighthouse factory" with 95% automation and a solid-state battery pilot line positions it to capitalize on current and future market opportunities [11]. Group 3: Economic Impact - The Luoyang base of CATL has driven a 113.6% year-on-year growth in the city's electrical machinery and equipment manufacturing sector, significantly boosting industrial investment and overall economic growth [11]. - The article emphasizes the importance of traditional industries laying the foundation for new industries, creating a multi-faceted industrial structure that supports economic resilience [8][9]. Group 4: Systemic Collaboration - The integration of innovation and industry chains is crucial for transforming economic potential into growth, with Luoyang focusing on deepening the collaboration between various sectors [12][13]. - The article discusses the need for institutional reforms and the revitalization of idle resources to support the transformation of old industrial bases [14]. Group 5: Future Outlook - Luoyang's strategic initiatives aim to enhance its manufacturing capabilities and foster a modern industrial system, with a focus on high-quality development across various sectors [18][19]. - The city plans to leverage its historical industrial base while embracing innovation and reform to ensure sustainable economic growth [23].

Core Viewpoint - Sodium batteries are emerging as a significant alternative to lithium batteries, marking a pivotal point in energy restructuring, with a focus on large-scale promotion of sodium batteries [3]. Group 1: Industry Developments - CATL has launched the Tianxing II light commercial vehicle series, featuring the first mass-produced sodium battery in the light commercial sector [3]. - The sodium battery sector index (BK0988) surged by 3.32% on the second trading day after CATL's announcement, reaching a new high since May 2021, with a cumulative increase of 62% since the launch of the sodium battery brand [3][4]. Group 2: Company Progress - Several listed companies, including Lianying Laser and Huayang Co., have reported advancements in their sodium battery businesses, with collaborations aimed at industrializing key components [4]. - CATL's CTO highlighted the advantages of sodium batteries, such as easier resource acquisition, better low-temperature performance, and higher safety, while acknowledging challenges like industrial costs and energy density compared to lithium batteries [4]. Group 3: Future Outlook - CATL plans to achieve economic viability and energy density of sodium batteries comparable to lithium batteries within three years [5]. - The Tianxing II light commercial vehicle's sodium battery maintains over 92% energy retention at -20°C, outperforming lithium batteries, which typically retain around 80% [5]. - By 2026, CATL anticipates large-scale applications of sodium batteries across various sectors, including battery swapping, passenger vehicles, commercial vehicles, and energy storage [5]. - The sodium battery market is projected to exceed 100 GWh in shipments by 2030, with potential price reductions of over 30% compared to lithium iron phosphate batteries as supply chain capacities improve [6].

Group 1 - The core viewpoint is that lithium carbonate prices are expected to remain high due to uncertainties surrounding the restart of key lithium mining operations and ongoing supply constraints [1][2] - Morgan Stanley's report highlights that the cost of lithium carbonate from integrated spodumene mines has decreased to 60,000 RMB per ton, indicating a potential for further cost reductions in the future [1][2] - The domestic lithium carbonate inventory has decreased by 783 tons week-on-week, with upstream lithium salt plants having finished goods inventory below 20,000 tons, suggesting a tight supply situation [1] Group 2 - Citic Securities notes that the Jiangxi spodumene lithium mine faces production pressure due to regulatory processes, which may exacerbate supply concerns [1] - The demand side remains strong, with expectations of export tax rebates leading to a robust consumption environment, complicating inventory accumulation [1] - Morgan Stanley expresses a more optimistic short-term outlook for lithium prices but remains cautious about mid-term trends, indicating potential trading opportunities in lithium stocks [2] Group 3 - Key companies in the lithium carbonate-related industry chain in the Hong Kong stock market include Ganfeng Lithium (01772) and Tianqi Lithium (09696) [3]

Core Viewpoint - Sodium batteries are emerging as a viable alternative to lithium batteries in certain fields, marking a significant step in energy restructuring, with a goal of widespread promotion of sodium batteries [3] Group 1: Industry Developments - CATL has launched the Tianxing II light commercial vehicle series solution, which includes the first mass-produced sodium battery for the light commercial sector [4] - The sodium battery sector index (BK0988) surged by 3.32% on the second trading day after CATL's announcement, reaching its highest point since May 2021, with a cumulative increase of 62% since the launch of the sodium battery brand [4] - Companies like Lianying Laser and Huayang Co. have reported progress in their sodium battery businesses, indicating growing interest and collaboration in the sector [4] Group 2: Technical Advantages and Challenges - Sodium batteries have notable advantages over lithium batteries, including easier resource availability, better low-temperature performance, higher safety, and minimal temperature increase during high-rate charging [4] - However, challenges remain, such as current industrial costs, maturity of the supply chain, and energy density, which are still inferior to lithium batteries [5] Group 3: Future Outlook - CATL plans to achieve economic viability and energy density of sodium batteries comparable to lithium batteries within the next three years [5] - The Tianxing II light commercial vehicle is designed for cold regions, maintaining a cell energy retention rate of over 92% at -20°C, compared to around 80% for lithium batteries [5] - By 2026, CATL aims for large-scale applications of sodium batteries across various sectors, including battery swapping, passenger vehicles, commercial vehicles, and energy storage [5] Group 4: Market Projections - The "National Good Car" Aion UT Super, jointly launched by JD, GAC Group, and CATL, will feature a sodium battery version expected to go into mass production in the second quarter of this year [6] - By 2030, the shipment volume of sodium batteries in both vehicle and non-vehicle sectors is projected to exceed 100 GWh, with Morgan Stanley predicting a price reduction of over 30% compared to lithium iron phosphate batteries when production scales reach 100 GWh [6]

Investment Rating - The industry investment rating is "Hold" [6] Core Insights - The automotive sector experienced a weekly increase of 2.20%, with the best-performing sub-sector being automotive services, which rose by 6.87% [3] - The average daily wholesale volume for domestic passenger car manufacturers was 51,200 units, a year-on-year decrease of 28.00%, while the average daily retail volume was 50,200 units, down 22.00% year-on-year [3] - In January, the narrow passenger car retail market is expected to reach approximately 1.8 million units, with new energy vehicles accounting for around 800,000 units, resulting in a penetration rate of 44.4% [4] - CATL launched a light commercial vehicle solution featuring the industry's first mass-produced sodium battery, which can operate in extreme temperatures [4][11] - Tesla plans to sell the Optimus robot to the public by the end of next year, indicating a significant future business line for the company [5] Summary by Sections Automotive Sector Performance - The automotive sector's weekly performance was +2.20%, ranking 15th among 31 primary industries [3] - The top five companies in terms of stock performance included New Coordinates (+36.30%) and Iron Flow Co. (+32.97%) [3] Sales and Market Trends - The expected retail sales for January are 1.8 million units, with a month-on-month decrease of 20.4% but a year-on-year increase of 0.3% [4] - The penetration rate for new energy vehicles in January is projected at 44.4% [4] Technological Developments - CATL's new sodium battery solution is designed for various vehicle types and can function effectively in extreme cold [4][11] - The first prototype of the Hongqi all-solid-state battery has successfully passed critical testing, marking a significant technological advancement for the company [11] Investment Recommendations - Focus on companies involved in intelligent vehicle technology and those with potential overseas sales [12] - Recommended companies include Beiqi Blue Valley and several component manufacturers [14]