Core Viewpoint - The lithium battery industry is experiencing a price increase due to strong demand in the energy storage market and supply constraints, leading to a tightening supply-demand balance and a trend of rising prices [4][5]. Group 1: Price Increases in Battery Companies - Fulin Technology has initiated price increases for some products, citing rising raw material costs and expanding market demand as key factors [6][7]. - Dejia Energy announced a 15% price increase for its battery products effective December 16, 2025, due to significant increases in raw material costs [9][10]. - The price adjustments by these companies reflect a collective demand within the battery industry, likely prompting more companies to follow suit [12]. Group 2: Factors Driving Price Increases - The primary drivers of battery price increases are market demand surges and supply shortages, with global lithium battery shipments expected to reach 1,922.2 GWh in 2025, up from 1,400 GWh in the first nine months of 2025 [15][16]. - The energy storage sector has seen a 90.7% year-on-year increase in battery shipments, with major companies like CATL and EVE securing nearly 500 GWh in orders this year [18]. - Rising raw material costs have also pressured profit margins, with lithium carbonate prices increasing over 66% from June to November 2025, and hexafluorophosphate lithium prices rising over 48% in the same period [19][20].

Core Viewpoint - The Chinese passenger car retail and wholesale sales are expected to reach historical highs in 2025, surpassing market expectations from last year [1] Group 1: Industry Resilience - The automotive industry is anticipated to be more resilient than market expectations, with retail sales in 2026 expected to remain stable year-on-year despite the reduction of replacement subsidies and halving of new energy vehicle purchase tax incentives [2] - Wholesale volume is projected to grow by 2.9% year-on-year in 2026, supported by an increase in exports [2] - The report suggests that if sales are weak in the first half of 2026, there is a possibility of new government stimulus policies being introduced [2] Group 2: Market Trends and Competition - The competition in the Chinese automotive industry is expected to intensify in 2026 due to a record number of new model releases, with some companies benefiting from aggressive pricing strategies [3] - Chinese brands are expected to continue increasing their market share, while foreign brands will launch more localized new energy models [3] - The demand for energy storage batteries is expected to improve, leading to a rise in battery prices, which may impact automaker profit margins [3] - Plug-in hybrid electric vehicles (PHEVs) are anticipated to regain growth momentum in 2026 due to the introduction of new models and the reduction of subsidies [3] Group 3: New Energy Vehicle Landscape - The competition in the new energy vehicle sector is expected to enter a new phase in the second half of 2026, with valuation premiums between new players and traditional automakers likely to narrow [4] - The competitive landscape will expand beyond vehicle manufacturing to include AI applications, such as Robotaxi and robotics [4] - Foreign brands are expected to accelerate the launch of new energy models, gaining a deeper understanding of the Chinese market [4] Group 4: Investment Recommendations - The preferred stock in the automotive sector is Geely Automobile, which has solid fundamentals and attractive valuations, with potential for continued growth in new energy vehicle sales [5] - The high-margin models expected to launch in the second half of 2025, along with accelerated new energy exports, are likely to boost profit margins for Geely [5] - In the battery sector, attention is drawn to the new player, Zhengli New Energy, which has achieved industry-leading profit margins due to its efficient operations and is expected to benefit from an optimized customer structure and potential battery price increases [5]