China produces 60% of the world's EVs and 75% of lithium-ion batteries. BYD, CATL and Ganfeng are the three stocks that define the global EV supply chain cycle.
The lithium carbonate price is the single most important input cost for EV batteries. When lithium spiked to $80,000/t in 2022, battery costs soared and EV margins collapsed across the supply chain. The subsequent crash to $17000/t has dramatically improved battery economics — but has crushed lithium miners like Ganfeng.
BYD (1211.HK) is unique in that it manufactures both EVs and the batteries that power them. This vertical integration means BYD benefits from falling lithium prices (lower battery costs) while maintaining exposure to EV volume growth. BYD surpassed Tesla as the world's top EV seller by volume in 2023.
CATL (300750.SZ) is the world's largest lithium-ion battery manufacturer with approximately 35% global market share. Unlike BYD, CATL is a pure-play battery supplier — its margins are most directly squeezed when lithium prices are high and improve dramatically when lithium corrects. At $17000/t, CATL's margin trajectory is improving significantly.
Historically, the best entry for Chinese EV stocks comes when lithium falls below $14,000/t and PMI is above 52 — signalling both cheap input costs and strong end demand. Current lithium at $17000/t is approaching but not yet at that threshold. Patient accumulation is warranted.
For informational purposes only. Not financial advice. See disclaimer.