Morgan Stanley's Growing Exposure to Ganfeng Lithium: A Strategic Bet on China’s EV Supply Chain?

Morgan Stanley’s recent escalation in its long position in Ganfeng Lithium’s H-shares—from 4.20% to 6.06% on August 26, and further to 6.68% by August 27, 2025—signals a calculated bet on the Chinese lithium giant’s role in the evolving electric vehicle (EV) supply chain [1]. This move, reported by the Hong Kong Exchanges and Clearing Limited (HKEX), contrasts with the company’s challenging financial performance in H1 2025, which included a net loss of RMB 913 million and a 33.6% decline in lithium carbonate prices to RMB 70,500/ton [2]. Yet, the investment appears to reflect a broader institutional conviction in Ganfeng Lithium’s long-term strategic value, particularly its leadership in solid-state battery development [3].

The institutional positioning aligns with Morgan Stanley’s broader Q2 2025 13F filings, which highlight increased exposure to industrial and technology sectors, though specific lithium holdings remain undisclosed [4]. This suggests a thematic focus on sectors poised to benefit from decarbonization trends, even as short-term volatility persists. Analysts note that Ganfeng Lithium’s operational challenges—high inventory levels and rising debt—pose risks, but its R&D pipeline in solid-state batteries could differentiate it in a crowded market [5].

Market sentiment, however, is mixed. Morgan Stanley’s research report projects a narrowing net loss for Ganfeng Lithium in H1 2025, from RMB 760 million in 2024 to between RMB 300 million and RMB 550 million, while 2Q25 results could swing between a profit of RMB 56 million and a loss of RMB 214 million [6]. The firm’s Underweight rating and $14.3 target price underscore caution, citing overproduction risks in China’s lithium sector. Without a significant reduction in output from key regions like Yichun, Jiangxi, the recent price rebound may prove unsustainable, pressuring 3Q25 earnings [7].

The strategic rationale for Morgan Stanley’s bet hinges on two pillars: the inelastic demand for lithium in EVs and the firm’s technical edge. Ganfeng Lithium’s partnerships with global automakers and its progress in solid-state battery commercialization position it to capture value as EV adoption accelerates. Yet, the investment’s success depends on resolving near-term headwinds, including inventory management and debt restructuring.

In conclusion, Morgan Stanley’s growing exposure to Ganfeng Lithium reflects a nuanced view of the EV supply chain. While the firm acknowledges cyclical risks, it appears to prioritize long-term structural growth, betting that Ganfeng Lithium can navigate volatility and emerge as a key player in the next phase of battery innovation. Investors, however, must weigh this optimism against the fragility of current financial metrics and the sector’s susceptibility to policy shifts and overcapacity.

Source:
[1] Morgan Stanley's long position in H-shares of Ganfeng Lithium increases to 6.06% on Aug 26 from 4.20% - HKEX, [https://www.marketscreener.com/news/morgan-stanley-s-long-position-in-h-shares-of-ganfeng-lithium-increases-to-6-06-on-aug-26-from-4-20-ce7c50ddd98df122]
[2] Ganfeng Lithium Investment Analysis Report - H1 2025, [https://www.linkedin.com/pulse/ganfeng-lithium-investment-analysis-report-h1-2025-xuan-ce-wang-zie7c]
[3] GANFENGLITHIUM (01772.HK) -1.180 (-3.722%) Short selling $25.14M; Ratio 5.485% expected interim net loss to range from RMB300 million to RMB550 million, [http://quotes.aastocks.com/en/stocks/news/aafn-con/NOW.1453464/industry-news/Source]
[4] Morgan Stanley's Analysis of the Q2 2025 13F Holdings, [https://www.moomoo.com/news/post/57129997/morgan-stanley-s-analysis-of-the-q2-2025-13f-holdings]