ESS battery 1Q26 shipments rose 117% y/y, with profit pools shifting toward leading battery makers

Overview

This report focuses on the global ESS battery industry, emphasizing that demand in 1Q26 remained highly robust despite seasonal headwinds. ICCSino data shows global ESS battery shipments of about 216GWh, up 117% y/y and 2% q/q, continuing the more than 90% growth seen in FY25. Growth mainly came from domestic policy support in China, demand from the EU and emerging markets, and new applications such as AIDC data center energy storage; meanwhile, the U.S. market is accelerating its shift toward non-China supply due to OBBBA and tariffs.

Core views

The core views are as follows: first, ESS battery demand is not a short-term pulse; 1Q26 shipments continued to grow on a high base, showing strong project pipelines in China, the EU, and RoW. Second, the supply side remains dominated by Chinese manufacturers, with Chinese players holding about 97% global share in 1Q26, but the U.S. market is shifting from Chinese supply to sources such as Korea and Japan due to regulation and tariffs. Third, the profit pool is diverging: battery makers such as CATL and CALB are better able to pass rising lithium prices on to customers, while ESS system suppliers have a longer pass-through cycle and face short-term gross profit pressure. Fourth, AIDC ESS may bring incremental demand, benefiting leading players with advantages in capacity, cost, and customer relationships.

Analysis framework

The report combines information from ICCSino, CESA, EIA, U.S. trade data, and company earnings discussions to analyze the ESS battery value chain from multiple angles including installations, shipments, regional structure, import sources, price pass-through, market share, and valuation comparisons. It compares demand changes across China, the U.S., the EU, and RoW, while also distinguishing opportunities for battery manufacturers, PCS/system suppliers, and Korean battery makers in different regions.

Methodology notes

• Industry supply-demand analysisShipment and installation tracking

  Track changes in ESS battery demand and BESS installations using GWh and GW metrics.

  The report uses global shipments, China installations, U.S. BESS installations, and regional export data to assess demand strength, while monitoring year-over-year, quarter-over-quarter, and seasonal changes.

• Value chain profit analysisCost pass-through and profit pool migration

  Compare the ability of battery makers and system providers to pass through rising lithium prices.

  Battery makers can raise prices to downstream customers relatively quickly, while system providers face short-term gross margin pressure due to contract renegotiation cycles and regional mix, showing that the profit pool is tilting toward leading battery makers with stronger pricing power.

• Regional policy analysisTariff- and regulation-driven supply chain restructuring

  Assess the impact of OBBBA and U.S. tariffs on China's ESS battery exports and on supply from Korea and Japan.

  U.S. imports of lithium batteries from China have declined, while imports from Korea have increased, indicating that policy constraints are changing supply chain share.

• Competitive landscape analysisMarket share and end-application breakdown

  Break down share by China, the U.S., the EU, RoW, as well as utility-scale storage, residential storage, and telecom energy storage.

  CATL remains a leader globally and across multiple regions, while EVE, Rept, CALB, BYD, and others have differentiated exposure across applications and regions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CATL-A / CATL-H

  A global ESS battery leader and one of the top picks

  Strengths

  Leading global share, clear advantages in cost and supply chain management, 1Q26 ESS sales up about 130% y/y, and beneficiary of AIDC demand.

  Weaknesses

  Has some exposure to the U.S. market, and its share was affected by capacity constraints in 2025.

  Comparison

  Compared with second-tier manufacturers, CATL's price increases are more moderate, but it is better able to maintain share through cost and quality advantages.

  Risks

  U.S. supply chain restrictions, capacity expansion falling short of expectations, lithium prices, and price competition.

• Sungrow

  The world's largest PCS supplier and a beneficiary in ESS systems

  Strengths

  Strong brand advantages in PCS and systems, benefiting from utility-scale storage, utility orders, and new data center direct-sales scenarios.

  Weaknesses

  System providers are slower to pass through raw material costs, and 4Q25 ESS gross margin fell 17 percentage points q/q.

  Comparison

  Compared with battery makers, Sungrow's short-term margins are more sensitive to rising costs.

  Risks

  Gross margin recovery slower than expected, domestic price competition, and the pace of overseas revenue recognition.

• BYD-H/A

  An integrated battery and auto company with rising ESS exposure

  Strengths

  ESS as a share of total battery output rose to about 23% in YTD26, while also benefiting from overseas EV demand and vertical integration.

  Weaknesses

  Market share in 1Q26 fell 2 percentage points versus FY25.

  Comparison

  Compared with CATL, BYD has weaker share momentum in ESS, but its diversified business and vertical integration provide support.

  Risks

  Further decline in ESS share, volatility in the auto business, and changes in overseas policy.

• LGES

  A beneficiary of the U.S. ESS supply chain shift

  Strengths

  Strong ESS order momentum; the report estimates it has a relatively large LFP ESS order backlog among Korean battery makers.

  Weaknesses

  Dependent on U.S. demand and order execution.

  Comparison

  Compared with Chinese manufacturers, LGES benefits more from U.S. demand for non-China supply chains.

  Risks

  Changes in U.S. policy, and weaker-than-expected order delivery and profit realization.

• SDI

  A Korean battery maker with improving U.S. ESS opportunities

  Strengths

  U.S. import data shows growth in batteries sourced from Korea, benefiting SDI from the shift in U.S. procurement sources; LFP cathode contracts point to around 25GWh/year of potential U.S. ESS shipments in 2028–29.

  Weaknesses

  Medium- to long-term capacity and contract execution still need to be monitored.

  Comparison

  Compared with Chinese manufacturers, SDI faces lower regulatory risk in the U.S. market.

  Risks

  U.S. demand volatility, execution risk in capacity expansion, and intensifying competition.

• EVE Energy

  A Chinese battery maker with relatively high ESS exposure among the covered names

  Strengths

  High exposure to the ESS business, with presence in segments such as the EU, RoW, and residential storage.

  Weaknesses

  Rated UW in the report, which may reflect valuation or competitive pressure.

  Comparison

  Compared with CATL, it is weaker in scale, cost, and bargaining power.

  Risks

  Price competition, share volatility, and uncertainty in overseas demand.

Key data

• Global ESS battery shipmentsAbout 216GWh in 1Q26, +117% y/y and +2% q/qICCSino data shows that demand remained strong even in a seasonally weak quarter.
• China ESS installationsAbout 34GWh in 1Q26, +116% y/yPreliminary CESA statistics show 3.37GW/9.65GWh of new additions in March.
• U.S. BESS installations1.6GW in 2M26, +91% y/ySupported by U.S. power tightness and AIDC demand, but Tesla 1Q26 ESS deployments declined 15% y/y.
• Global share of Chinese manufacturersAbout 97% in 1Q26Global ESS battery supply remains highly dominated by China.
• Regional shipment mix of Chinese manufacturersChina 44%, RoW 26%, EU 18%, U.S. 9%China's domestic share in 1Q26 was higher than 40% in 2025.
• Chinese manufacturers' exports to the U.S.-25% y/y and -29% q/q in 1Q26Affected by OBBBA and U.S. import rules.
• China exports to the EUMore than +210% y/y in 1Q26Supported by subsidy policies, project demand, and energy security factors.
• China exports to RoWAbout +160% y/y in 1Q26Emerging market demand was strong.
• CATL ESS salesMore than 50GWh in 1Q26, about +130% y/yThe company expects to continue running at full capacity in 2Q26.
• AIDC ESS demand assumptionA 1GW data center may require 15–20GWh ESSCATL's estimate of data center energy storage demand.
• BYD ESS exposureESS accounted for about 23% of total battery output in YTD26Higher than 17% in 2025 and 11% in 2024.
• CATL ESS exposureESS accounted for about 23% of total battery output in YTD26Higher than about 21% in 2025.

Impact & implications

In terms of investment implications, the report tends to view the high growth in ESS demand as an important re-rating factor for the battery value chain. The biggest beneficiaries include leading battery makers with advantages in cost, capacity, and overseas channels, as well as Korean battery manufacturers that can capture the U.S. shift toward non-China supply chains. Short-term risks include declining U.S. exposure for Chinese manufacturers due to U.S. regulation and tariffs, delayed cost pass-through by system integrators, and margin disruption from raw material price volatility.

Risks

• OBBBA, tariffs, and import rules in the U.S. continue to pressure Chinese ESS battery exports to the U.S.
• If rising lithium prices cannot be fully passed through, margins for battery makers or system providers will be squeezed.
• ESS system suppliers have longer contract renegotiation cycles, and short-term gross margins may remain under pressure.
• Demand in the EU and RoW is partly driven by subsidies, geopolitical conflict, and energy prices; if policy or the energy environment changes, demand may fall back.
• Competition in China's domestic market is intense and concentration is low, so price wars may weaken profitability.
• AIDC ESS is still in the expansion stage as a new application, and the pace of commercialization and order execution remains uncertain.

What to watch

• Whether CATL continues to run at full capacity in 2Q26, and trends in ESS orders and pricing.
• The continued divergence in U.S. lithium battery import data between China-sourced and Korea-sourced batteries.
• ESS project tenders, subsidy policies, and installation pace in China, the EU, and RoW.
• Changes in lithium prices and the speed of cost pass-through by battery makers and system providers.
• Sungrow's overseas revenue recognition and gross margin recovery progress.
• Delivery of AIDC data center energy storage demonstration projects and conversion into scaled orders.
• Share changes for Chinese manufacturers such as CATL, BYD, EVE, Rept, and CALB across different regions and application scenarios.