EB SECURITIES has released a new report on the lithium battery industry, indicating that the sector is currently trading on the expectation of accelerated electrification penetration due to high oil prices. This trend is resonating with strong first-quarter earnings reports and continued high production schedules in the second quarter. Commercial vehicles are highly sensitive to oil prices in terms of economics, and the adoption rate of electric heavy-duty trucks overseas is expected to rise. According to a March 25 report, the chairman of Sany Group stated that since 2026, the company's domestic and overseas orders for electric heavy-duty trucks have both grown by over 50% year-on-year, and overseas orders are projected to increase over the next 2-3 years. Data from ACEA shows that European electric truck sales reached 13,000 units in 2025, a year-on-year increase of more than 70%, accounting for 4.2% of total EU truck sales that year. Given the high sensitivity of commercial vehicles to purchase and operating costs, sustained high oil prices are likely to accelerate the replacement of traditional heavy-duty trucks with electric alternatives overseas. Weak oil supply chains abroad further support this shift, potentially leading to stronger-than-expected demand for electric power systems overseas. The secretary-general of the China Passenger Car Association noted that if oil prices remain high, the penetration rate of new energy vehicles could increase by an additional 2-3 percentage points. While the growth rate of domestic new energy vehicle sales has slowed, the average battery capacity per vehicle has risen significantly, supporting steady growth in domestic power battery demand for 2026. Sales of new energy passenger vehicles are recovering domestically, while exports have doubled. The association estimates that retail sales of passenger vehicles in March reached approximately 1.7 million units, up 64.5% month-on-month but down 12.4% year-on-year. New energy vehicle retail sales are estimated at around 900,000 units, with the penetration rate recovering to about 52.9%. According to data from the China Association of Automobile Manufacturers, new energy passenger vehicles accounted for 43.7% of domestic passenger vehicle sales, while new energy commercial vehicles made up 22% of domestic commercial vehicle sales, though these figures have declined slightly due to reductions in subsidies. From January to February, exports of new energy vehicles reached 583,000 units, doubling compared to the previous year. Demand for energy storage remains robust, and growth in exports and battery capacity is driving increased demand for power batteries. Data from the China Automotive Power Battery Industry Innovation Alliance shows that from January to February, cumulative sales of power and energy storage batteries in China totaled 262.0 GWh, a year-on-year increase of 53.8%. Power battery sales accounted for 177.2 GWh, or 67.6% of the total, growing 36.5% year-on-year, supported by rising exports and higher battery capacity per vehicle. Energy storage battery sales reached 84.8 GWh, representing 32.4% of total sales and surging 108.9% year-on-year, demonstrating strong growth even amid high lithium prices. The average battery capacity per new energy vehicle increased significantly, reaching 64.9 kWh from January to February, up 32.3% year-on-year. Among these, the average capacity for pure electric trucks was 239.8 kWh, a 30.4% increase, while pure electric passenger vehicles averaged 65.4 kWh, up 22.5%. Plug-in hybrid passenger vehicles saw an average capacity of 35.7 kWh, rising 38.6%. Risks include potential underperformance in new energy vehicle sales, weaker-than-expected energy storage demand, and uncertainties in technology development pathways.