20160107-三星证券-2016_EV_Battery_Outlook_China_s_EV_market_to_provide_Korean_battery_makers_with_room_for_growth_51页_2mb

2016 EV Battery Outlook Summary

Core Content

• The 2016 EV Battery Outlook highlights the growing importance of the rechargeable battery industry, particularly in the context of the expanding electric vehicle (EV) market.
• China's EV market is a key driver of growth, with the potential to more than double sales from 2015 to 2016, supported by government policies, infrastructure development, and incentives.
• Korean battery manufacturers are well-positioned to benefit from this growth due to their early entry into China and mass production capabilities, compared to Japanese firms who face market penetration challenges.
• The global EV battery market is projected to grow at a CAGR of 45% from 14GWh in 2015 to 88GWh in 2020, outpacing the IT LiB market.

Main Points

1. EVs Back in the Spotlight

• EV-related stocks saw valuation spikes in 2009, 2013, and 2015 due to market growth and regulatory changes.
• China's EV market reached 230,000 units in 2015, accounting for 44% of the global total.
• The US EV market declined in 2015 due to consumer delays before new model launches.
• Europe saw a 75% year-on-year increase in EV sales in 2015, outperforming the US.

2. China's EV Market Expansion

• China's EV sales are expected to rise to 0.45m units in 2016, with government support and infrastructure development playing crucial roles.
• BYD leads the Chinese EV market with 37% market share, followed by Zotye and Geely.
• Low-speed EVs (LEVs) account for 30% of the Chinese EV market, using lead storage batteries, while electric buses and taxis are growing rapidly.
• China's electric bus market nearly doubled in 2015, significantly boosting battery demand.
• Korean battery firms like LG Chem and Samsung SDI have established early production facilities in China, giving them a competitive edge.

3. Rechargeable Battery Makers' Profitability Outlook

• Battery makers are expected to improve profitability through mass production, cost-cutting, and economies of scale.
• Rechargeable battery utilization rates are projected to rise from below 30% in 2014 to 80% by 2017-2018, with a corresponding increase in demand.
• Cost-cutting is achievable through higher energy density and a shift to lower-cost materials, with cell prices expected to fall from USD210-250/kWh in 2015 to USD145/kWh by 2018.
• Korean battery firms are advised to adopt a near-term trading strategy due to the potential for price corrections after strong share-price performance in 2015.

4. Moves by Global Auto OEMs and IT Firms

• Global automakers are expanding their EV line-ups, with plans to introduce mass-market models by 2017.
• Ford, Volkswagen, Daimler, and GM are among the major OEMs investing in EV development.
• Tesla is set to launch its Model 3 in March 2016, with a range of 200 miles and a price of USD35,000.
• IT firms like Apple and Google are entering the EV market, with Apple aiming for a 2020 EV launch and Google planning to spin off its autonomous driving business.
• Korean IT companies are also entering the EV space, with LG Electronics collaborating with GM and Samsung Electronics establishing a new smart car parts business.

Key Information

• China's EV Market Growth: Expected to grow from 0.23m units in 2015 to 0.45m units in 2016, with further expansion to 3.36m units by 2020.
• Korean Battery Makers: LG Chem and Samsung SDI are leading the charge in China with early mass production facilities, offering them a competitive advantage.
• Profitability Outlook: Battery makers are anticipated to improve profitability through cost-cutting and economies of scale, with cell prices projected to drop significantly.
• Global EV Trends: The global EV market is expected to grow rapidly, with EVs accounting for 3% of new car sales by 2020.
• CO2 Regulations: Tightening CO2 regulations are pushing automakers to increase PHEV and BEV production, with significant penalties for non-compliance.
• IT Firms' Involvement: Major IT firms are entering the EV market, with a focus on autonomous vehicles and smart car ecosystems.

Investment Ideas

• Soulbrain: Recommended as a top pick due to its electrolyte supply to the EV market, benefiting from China's growth.
• LG Chem and Samsung SDI: Maintained as BUY, but advised to adopt a near-term trading approach.
• Posco Chemtech: Poised for positive changes due to its use in electric buses.
• Ecopro: Warrants caution until new growth drivers are identified to support its valuation.

Conclusion

The EV battery market is experiencing significant growth, driven by China's expanding EV market, global automaker investments, and regulatory pressures on internal combustion vehicles. Korean battery manufacturers are well-positioned to capitalize on this growth, with early entry into China and a focus on cost-effective production. The industry is expected to see a turnaround in profitability by 2017-2018, supported by increased utilization rates, cost-cutting measures, and expanding client bases.