"Driven by the dual engines of 'energy storage + commercial vehicles,' China's battery industry enters a new cycle of comprehensive recovery."

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After nearly two years of deep adjustments, China’s battery industry is ushering in a clear recovery turning point. Driven strongly by the two major engines of energy storage systems and commercial electric vehicles, market demand has significantly rebounded since mid-2025, boosting both capacity utilization and product prices synchronously. The entire industry chain is now entering a comprehensive upward cycle.

According to WindChaser Trading Desk, a recent research report from HSBC on November 11 shows that data from the first nine months of 2025 clearly reveals this trend. Domestic energy storage battery sales increased by 66% year-on-year, while exports more than doubled; in the electric vehicle sector, battery installations in commercial vehicles surged by 136% year-on-year, becoming the key driver of industry growth, with growth much higher than that of the passenger vehicle market.

The strong rebound in demand is quickly being transmitted to the supply side. After previous overcapacity pressures and profit squeezes, supply-side discipline in the industry has strengthened. Currently, leading battery suppliers are operating at nearly full capacity and have taken the lead in launching a new round of expansion plans. The rebalancing of supply and demand has pushed up prices of batteries and key materials, putting an end to the long-standing adjustment trend.

HSBC analysts pointed out in their report that the cyclical turning point of the industry has been established. As demand remains strong and before new capacity is fully released, the market is expected to enter a window period of simultaneous volume and price increases. For investors, this means that after a round of reshuffling, leading companies with technological and scale advantages will embrace new growth opportunities.

Explosion in Energy Storage Demand, Domestic and Overseas Markets Take Off Together

The explosive growth of the energy storage market is the primary driving force behind the recovery of China’s battery industry. According to the China Chemical and Physical Power Industry Association (CABIA), in the first nine months of 2025, domestic energy storage battery sales reached 211GWh, up by 66% year-on-year; during the same period, exports reached 71GWh, an astounding year-on-year increase of 110%.

The growth in domestic demand benefits from policy optimization and adjustment. The report points out that the cancellation of compulsory storage allocation policies did not suppress demand. Instead, improvements in the spot electricity market mechanism and the introduction of local independent energy storage subsidy policies have enhanced project investment returns, making demand more market-driven.

Overseas markets also show strong growth potential. According to data from Zhongguancun Energy Storage Industry Technology Alliance (CESA), in the first nine months of 2025, new overseas energy storage orders won by Chinese battery manufacturers reached as high as 215GWh, a year-on-year increase of 132%. Europe (22%), the Middle East (20%), and Australia (19%) became the main sources of growth. The energy transition policies in these regions and the construction of AI data centers are driving an ever-expanding demand for industrial and commercial energy storage projects.

Commercial Vehicles Become a New Growth Pole, Rapid Increase in Market Penetration

In the electric vehicles sector, the commercial vehicle market is breaking out, becoming another major engine for battery demand. According to CABIA data, in the first nine months of 2025, domestic commercial vehicle battery installations reached 92GWh, a whopping year-on-year rise of 136%, with its share of total electric vehicle battery installations rising from 11% in the same period last year to 19%. Passenger car battery installations maintained a steady growth of 31%, reaching 402GWh.

There are three main drivers behind the acceleration of commercial vehicle electrification:

Policy support: Includes exemptions from vehicle purchase taxes and “old-for-new” subsidy policies for outdated freight vehicles, the latter providing a subsidy 30,000 RMB higher for new energy heavy trucks compared to traditional fuel vehicles.Cost parity: With ongoing declines in battery costs, electric heavy trucks now have a total cost of ownership (TCO) advantage over diesel and natural gas trucks.The rise of battery swapping: The spread of battery swap stations solves operational headaches for heavy trucks due to their large battery capacities (typically 400–600KWh) and the resulting long charging times.

Supply-Side Discipline Takes Effect, Prices Recover

While demand is robustly rebounding, the supply-side landscape is also undergoing positive changes. Since 2023, the battery industry had faced difficulties, with most second- and third-tier suppliers seeing utilization rates once fall below 50%. However, after nearly two years of market clearing and disciplined expansion, supply-demand balance is being rebuilt.

According to HSBC’s report, since the first half of 2025, leading battery suppliers have been operating at near full load, with utilization rates for second- and third-tier manufacturers also rising to 50%–70%. Top players such as CATL have announced new expansion plans, marking the start of another round of expansion.

Improvements in supply and demand have directly boosted prices along the industry chain. Data shows that, over the past three months, cell prices have risen by 3–4%, lithium carbonate prices by 14%, LFP and ternary cathode material prices by 9% and 19% respectively, and separator prices have increased by 6–8%. Analysts believe that price recovery is already evident, and the upward trend is expected to continue in Q4 and next year.

In this regard, HSBC analysts Yuqian Ding and Elaine Chen have maintained “buy” ratings on CATL, Yunnan Energy New Material, and REPT, viewing these firms as beneficiaries of the rising cycle, with expected sales growth and improved profitability.

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The above content is originally from WindChaser Trading Desk.

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