It’s important if Tesla hits rock bottom and bounces back. That’s how battery companies come to life

It’s important if Tesla hits rock bottom and bounces back. That’s how battery companies come to life

About a month ago, at a customer seminar, I suggested additional watering down those who were worried because of the large losses in the Chinese electric vehicle ETF. I explained the logic that most of the oversupply and price competition from China seem to have been reflected in the stock price, not just because the price fell a lot. Lithium prices have stabilized downward, and Tesla’s average used car price has fallen to an attractive level compared to internal combustion engines.

Back in September 2022, when the semiconductor industry’s stock price was at its bottom, I explained it with inventory and price logic. At that time, semiconductors were in a situation where prices plummeted due to a severe oversupply, and I had no choice but to explain it in terms of supply because it was before the answer was made in terms of demand. Facebook is also stuffed to explain the logic that this semiconductor cycle is likely to be led by the post-process as I think the stock price is forming a bottom.

CATL’s stock price soared more than +14% today. Some people simply see it as a technical rebound, but I personally want to give it a big meaning. In the market, the law of action and reaction works. When one wind goes out, the other wind fills up. Today’s market was important to see where some of the winds from AI semiconductors are moving, both globally and in the domestic market.

If you think that the secondary battery sector is bottoming out, you need to think about where to take the next step. I was explaining the logic in a seminar earlier on. The meaning of catharsis is slowing demand, oversupply mainly in China, resulting in an increase in inventory and a decrease in prices. However, it explains that the importance of catharsis when it comes to stock prices is not from consumption, but from a change in technology and process strategy to overcome catharsis.

The battery industry believes that investment in technology can be expanded and accelerated in the next stage. The next-generation secondary battery strategy is important because the global battery industry is in the hegemonic war, and if China is trying to strengthen its competitiveness in the low-cost market to become a volume model, Korea and Japan will be trying to protect the volume model by developing next-generation secondary batteries, an advanced technology, into low-end technology. The U.S. and Europe will focus their policies on reorganizing the market structure centered on startups and automobile OEMs so as not to miss the automobile industry’s hegemony.

In a way, it may be natural that a representative all-solid-state battery in the next-generation secondary battery leads to the start of the rebound in the secondary battery sector in the domestic market. And the leading trend is likely to last quite a long time. Unlike 2023, I explained at the seminar that all-solid batteries in 2024 will be formed into industries as the value chain becomes advanced, not just a theme. I explained that Samsung SDI is leading the way, so it is necessary to pay attention to the value chain of all-solid-state batteries formed within Samsung SDI.

When the industry grows in the early stages, investment is concentrated on quantitative expansion because it is in excess demand. During this period, expansion of CAPA faster than competitors, entry into new markets, and expansion of value chain are major investment points. Qualitative investment becomes important afterwards because the industry shows excess supply as it goes through the cascade. Material technology and process technology become important in terms of productivity and yield. Typically, materials will include CNT conductive material and silicon cathode material, and the process will have dry electrode process.

Semiconductors are characterized by equipment technology leading the industry, while secondary batteries are characterized by material technology leading the industry. Semiconductors are mainly responsible for performance improvement and cost reduction, while secondary batteries are materials. Secondary batteries are material-oriented industries, where raw material costs account for about 70%. When cost reduction through materials progresses to some extent and reaches its limit, it becomes important to improve the process through equipment. This secondary battery cycle is the reason to pay attention to companies that have secured cutting-edge technology in the equipment industry. There is a possibility that such equipment companies’ stock prices will rise considerably in the mid to long term, just like equipment companies that have secured cutting-edge technology in semiconductors.

In the Chinese market today, not only CATL but also lithium companies such as steel rod lithium +9.3% and celestial lithium +8.6% rose a lot. What is still important is Upstream and supply chain. Minerals, raw materials, refining, etc. are still insufficient areas worldwide, except for China. Until now, oversupply had been a major damage, but the reaction could be large.

Because secondary batteries lack materials to generate strong demand like the AI revolution in semiconductors, the overall rate of increase may be slow. That’s why detailed studies are more important and you should be able to focus on the areas you want to focus on.