Lithium batteries are the core of new energy vehicles. Alongside China's remarkable achievements in the field of new energy vehicles, the Chinese lithium battery industry has become a globally influential business card. The industry has come a long way in the past decade, witnessing the growth and rise of leading companies such as CATL (宁德时代), EVE Energy (亿纬锂能), Farasis Energy (远景动力), and Gotion High-Tech (国轩高科).
Since 2021, Chinese lithium battery manufacturers, led by CATL (宁德时代), have accelerated overseas factory construction to seize the expanding global market for new energy vehicles. The series focuses on the industry's growth and transformation from scratch, analyzing case studies to reveal the shifting dynamics in the lithium battery sector over the past decade. This allows readers to explore the industry background behind China's rise in the lithium battery market.
This article focuses on the development of China's lithium battery industry after 2020. Due to the advantages of high energy density and fast charging, lithium batteries have gradually penetrated various fields, especially in electric vehicles, leading to a rapid expansion of the market. The strong global demand for new energy vehicles has driven an explosive growth in China's lithium battery exports.
Behind the increase in lithium battery exports is the continuous improvement of indigenous technology and production capacity by Chinese manufacturers, as they strive to establish a localized industry chain. With more and more Chinese new energy vehicle and lithium battery companies participating in the global new energy industry, China is set to gain unique influence in the new energy sector.
Governments Support for New Energy Vehicles Drives Accelerated International Expansion of Lithium Battery Industry
According to the statistical data from the General Administration of Customs of China, the export value of Chinese lithium batteries steadily increased at an annual rate of 20% to 35% from 2017 to 2020. By 2021, the total export value reached CNY 183.526 billion , experiencing an explosive growth of 66.5%. In 2022, the export value of Chinese lithium batteries reached CNY 342.656 billion , representing a remarkable year-on-year growth of 86.7% and setting a new historical record. Among these, the export value to the United States alone reached CNY 68.21 billion , marking a 112% year-on-year increase.
The record high lithium battery exports are attributed to several reasons. On one hand, the growth in the export of new energy vehicles and the overseas energy storage market has boosted the export of the lithium battery industry. On the other hand, the support from governments worldwide in the new energy sector has also played a crucial role.
According to the latest production and sales data released by the China Association of Automobile Manufacturers on June 9th, China's new energy vehicles achieved production and sales of 713,000 and 717,000 units in May, with year-on-year growth rates of 53% and 60.2%, respectively, and a domestic market share of 30.1%. The cumulative production and sales from January to May reached 3.005 million and 2.94 million units, with year-on-year growth rates of 45.1% and 46.8%, respectively, and a market share of 27.7%.
During this period, China's new energy vehicle exports maintained a trend of doubling year-on-year: in May, new energy vehicle exports reached 108,000 units, a 7.9% increase from the previous month and a 1.5-fold increase year-on-year. The cumulative exports from January to May reached 457,000 units, a 1.6-fold increase year-on-year. Among the top ten companies in terms of complete vehicle exports, BYD（比亚迪）'s growth was the most eye-catching, with a cumulative export of 69,000 units from January to May, a 14.2-fold increase year-on-year.
The sustained high growth of new energy vehicle exports has driven the export of lithium batteries. According to data from the Ministry of Industry and Information Technology, China's total lithium battery exports in 2022 reached CNY 342.656 billion , an 86.7% year-on-year increase. In the first two months of this year, the total lithium battery exports in the country reached CNY 70.6 billion , and it increased to CNY 75.4 billion in the months of March and April.
Data released by the China Automotive Power Battery Industry Innovation Alliance shows that in May, Chinese power battery companies exported a total of 11.3 GWh of batteries. Among them, ternary batteries accounted for 67.2% of the total exports, reaching 7.6 GWh, while lithium iron phosphate batteries accounted for 32.6% of the total exports, reaching 3.7 GWh. From January to May, the cumulative battery exports of Chinese power battery companies reached 45.9 GWh. Among them, ternary batteries accounted for 71.4% of the total exports, reaching 32.8 GWh, while lithium iron phosphate batteries accounted for 28.4% of the total exports, reaching 13.0 GWh.
In the field of energy storage, according to forecasts from CICC (China International Capital Corporation), global energy storage demand will reach 189 GWh this year, with a year-on-year growth of over 60%. The International Energy Agency predicts that global energy storage capacity will increase by 56% in the next five years, exceeding 270 GW by 2026.
According to data released by the South Korean battery market research firm SNE Research, in 2022, Chinese companies held a 60.4% market share among the top 10 companies in the world for power battery installations in vehicles.
Meanwhile, Chinese lithium battery companies are accelerating their "going global" efforts. According to incomplete statistics from BatteryChina, there are currently 28 overseas factories established by Chinese lithium battery companies, with 20 of them disclosing planned capacities totaling over 506.5GWh. Zhao Weijun, the Executive Director and China President of Farasis Energy, stated, "By 2025, there is an estimated 400GWh capacity gap in the overseas market. The localization attribute of the automotive industry will determine which companies can meet this demand and seize opportunities abroad."
Chinese enterprises are also speeding up collaboration with materials and equipment companies in the upstream of the lithium battery industry to expand their presence in overseas markets. Companies like CATL , BYD, Gotion High-Tech（国轩高科）, EVE（亿纬锂能）, SVOLT Energy（蜂巢能源）, Envision AESC（远景动力）, Farasis Energy, SUNWODA（欣旺达）, JEVE (捷威动力), and Rept（瑞浦兰钧） have strategically positioned themselves early and demonstrated competitive advantages in technology and production capacity, driving the continuous expansion of China's lithium battery industry scale and export volume.
Recently, Rept publicly announced plans to establish factories in Europe and Indonesia, with the goal of reaching a total capacity of 200GWh by 2026. Gotion High-Tech has entered into a strategic cooperation agreement with Japan's Edison Energy to jointly explore Japan's energy storage and recycling markets, promoting the development of renewable energy in Japan and facilitating Gotion High-tech's entry into the Japanese market.
Furthermore, EqualOcean has learned that BYD plans to establish a battery factory in Spain. CATL's German factory started production in December of last year, and the company is planning to build a 100GWh battery factory in Hungary.
Envision AESC has already set up three zero-carbon battery factories in France, the UK, and Spain, with construction underway for factories in countries like the United States and Japan. Farasis Energy（孚能科技）'s battery factory, established in collaboration with Turkey's TOGG (Turkish Automobile Joint Venture Group), is expected to begin production in stages this year. SVOLT Energy is building a planned 24GWh battery factory in Saarland, Germany, which is expected to start production by the end of 2023. Additionally, they are planning a second overseas factory in Brandenburg, Germany, which is expected to begin production in 2025.
Rising Import Barriers in the US and Europe Pose Serious Challenges for the Chinese Power Battery Industry's Overseas Expansion
In the future, China's domestic lithium battery exports may encounter certain trade barrier risks, and lithium battery products' exports may face various restrictions. Independent researcher in the field of new energy and intelligent connected vehicles, Cao Guangping, believes that these restrictions include the construction of trade or technology barriers in the countries or regions where lithium batteries are exported. Requirements may include compliance with local regulations for emissions and battery material recycling. In addition, automotive companies need to ensure stable battery supply, while the supply of battery raw materials must be timely and reliable. Simultaneously, maintaining a leading position in terms of technology, quality, and safety is also essential.
In the US, the "Inflation Reduction Bill" and other policies are impacting Chinese battery companies, pushing them to actively explore a "going global" strategy for battery technology. It has been reported that Tesla has discussed plans with US government officials to establish a battery factory in the US in collaboration with CATL, with Tesla planning to obtain technology licensing from CATL, similar to the cooperative model with Ford and CATL.
According to the European Commission Vice President, Maros Sefcovic, EU automakers plan to fully adopt domestically-produced power batteries by 2025, positioning Europe as the world's second-largest battery manufacturer. To achieve this goal, the EU has allocated USD 24 billion in funding for the construction of battery production capacities in member countries. Additionally, the EU will initiate a trial of the Carbon Border Adjustment Mechanism (CBAM), also known as the carbon tariff policy, from October 1st this year, with full implementation scheduled for 2026. This will raise the threshold for market access to the EU. Furthermore, based on the EU's "New Battery Regulation," power battery companies' carbon footprints will be rated, and specific thresholds will be established by 2027. Companies exceeding these thresholds will be barred from entering the EU market.
Moreover, the EU's "European Battery and Waste Battery Regulations" will require both imported and domestically-produced power battery products to declare their carbon footprints starting from July 1st, 2024. From January 1st, 2026, these products must also be marked with their carbon intensities, utilizing a carbon labeling system. From July 1st, 2027, carbon footprint limits will be introduced, and power battery products exceeding these limits will be restricted from entering the EU market. In response to the increasing "carbon barriers," domestic power battery companies need to comprehensively transform their entire production and supply chain, which will increase export costs for these companies.
Despite facing certain constraints from policies such as the US "Inflation Reduction Bill," the EU's "Carbon Border Adjustment Mechanism," the "Net Zero Industry Bill," and the "Critical Materials Bill," China's leading players in the lithium battery sector are firmly advancing their globalization strategies.
Expanding into Southeast Asia and South Asia: Chinese Power Battery Companies Seek New Opportunities
Leading Chinese Power Battery Companies Demonstrate Global Competitiveness: Seeking New Opportunities in Southeast Asia and South Asia Markets"
In the fierce competition ahead, top-quality enterprises are expected to further solidify their advantages in the Chinese power battery industry chain. Despite challenges in expanding into the US and European markets, they still have opportunities to increase market share in other regions.
EqualOcean has learned that South Asian and Southeast Asian countries, such as India, Thailand, and Indonesia, are experiencing opportunities for the development of the lithium battery industry. According to the International Energy Agency (IEA) "Global Electric Vehicle Outlook 2023" report released in April this year, India's pure electric vehicle sales reached nearly 50,000 units in 2022, quadrupling the sales of 2021, though there is still room for growth compared to China.
The latest data from the ASEAN Automotive Federation shows that from January to March 2023, car sales in Southeast Asian countries, including Malaysia, Thailand, Singapore, and Indonesia, totaled approximately 860,000 units, growing by 4.3% year-on-year. In terms of production, the six major countries in the region manufactured over 1.16 million cars, with an 8.2% year-on-year increase. The rapid growth in car sales provides a solid market foundation for the rise of new energy vehicles.
To encourage the development of new energy vehicles and achieve energy transition, Southeast Asian countries are actively inviting Chinese electric vehicle companies for investment and cooperation. Malaysia has announced exemptions from import and consumption taxes for new energy vehicles, as well as road tax exemptions for imported new energy vehicles. Indonesia has reduced the value-added tax rate for new energy vehicles, and Thailand is striving to transform its market into a regional and global automotive and parts manufacturing hub to promote the country's transition to a low-carbon economy.
Recently, the Secretary-General of the Thailand Board of Investment (BOI), Narit Therdsteerasukdi, revealed, "We are in negotiations with numerous battery manufacturers, including CATL, hoping to attract battery producers to establish factories in Thailand." Besides, Southeast Asian countries like the Philippines, Indonesia, and Vietnam have also extended olive branches to BYD, the world's largest electric vehicle manufacturer. Throughout this year, news about BYD's expansion in Southeast Asia has been continuously reported.
Earlier this year, there were reports that BYD planned to build a factory for manufacturing automotive components in Vietnam, and the two sides were discussing the factory's location, with plans to commence construction by mid-2023. Recently, Bloomberg cited the words of Rudolf, the Deputy Minister of Trade of the Philippines, stating that BYD is in-depth discussions with the Philippines. Insider sources revealed that BYD is also in negotiations with Indonesia for investment in an electric vehicle factory in the country.
Since last year, BYD's layout in Southeast Asia has accelerated. In September 2022, BYD announced the signing of a land purchase agreement in Thailand, planning to build an electric vehicle factory in the WHA Eastern Seaboard Industrial Estate with an estimated annual production capacity of 150,000 vehicles. Subsequently, on October 10th, BYD launched its first pure electric passenger car, the ATTO 3, in the Thai market. BYD Chairman Wang Chuanfu stated that Thailand is the largest automotive market in ASEAN and the automotive manufacturing center in Southeast Asia, aligning well with BYD's "green dream."
In addition to the electric vehicle markets in China, the United States, Europe, and other regions, an increasing number of new energy vehicle and lithium battery companies are considering South Asian and Southeast Asian countries as crucial emerging markets.
Due to its industrial chain and geographical advantages, Thailand has long been one of the main automotive production bases in Southeast Asia. Chinese brands such as SAIC's MG（上汽名爵）and Great Wall Motors（长城汽车） have already started production in Thailand. According to data from the Thailand Automotive Association, in 2021, Chinese brands held about 90% of the market share in Thailand's electric vehicle market. Currently, Great Wall Motors has established a production line in Thailand and introduced multiple new energy vehicle models under its Haval and Ora sub-brands.
As BYD's first overseas electric passenger car production factory, BYD's Thailand plant is scheduled to commence production in 2024. The cars produced there will be sold in the Thai domestic market and will also be exported to neighboring ASEAN countries and other regions. In Indonesia, SAIC-GM-Wuling (SGMW) and the Indonesian Ministry of Maritime Affairs and Investment have formally signed a memorandum of understanding for a new energy vehicle project. This move aims to expand investments in Indonesia and introduce more new energy vehicle models to the local market.
Various Chinese automotive companies like BYD, Great Wall Motors, Wuling, NETA, and others, as well as battery industry-related companies like CATL, Gotion High-Tech, EVE Energy, Sunwoda, Jiangsu Azure（蔚蓝锂芯）, Tsinghan Holding（青山集团）, GEM（格林美）, and Huayou Cobalt（华友钴业）, have all invested and cooperated in Southeast Asia.
In May of the previous year, CATL announced a strategic cooperation memorandum with Arun Plus Limited, a wholly-owned subsidiary of Thailand's national oil company（PTT）. Both parties will collaborate on battery-related businesses in the ASEAN region. CATL also announced cooperation with two Indonesian state-owned enterprises to invest in and build a power battery industrial chain project in Indonesia, which includes red earth nickel mine development, pyrometallurgical refining, hydrometallurgical refining, battery recycling, as well as ternary cathode materials and ternary battery manufacturing.
In 2022, Gotion High-Tech, in collaboration with Vietnamese conglomerate VinGroup, began constructing the first lithium iron phosphate battery factory in Vietnam. The first phase is planned to have an annual capacity of 5 GWh, with production expected to begin by the end of 2023. In December 2022, Gotion High-Tech's wholly-owned subsidiary, Gotion Singapore, and Thailand's lithium battery company, Nuovo Plus, signed a joint venture agreement to establish a lithium battery pack base.
Power Battery Companies Garner Multiple Overseas Investments
Since mid-year, Overseas Capital Market Financing Emerges as New Trend for Power Battery Industry Chain. According to incomplete statistics, five companies - Gotion High-Tech, Sunwoda, GEM,CATL, Shanshan, and Keda Industrial - have successfully attracted overseas capital investments through the issuance of Global Depositary Receipts (GDRs). Gotion High-Tech, in particular, became the first Chinese power battery company to issue GDRs and list in Switzerland, setting a precedent. Additionally, seven other companies, including Senior Technology（星源材质）and Hangke Technology（杭可科技）, are still in the process of applying for GDR issuance.
China's lithium battery industry has gained significant attention in the international market, leading more domestic companies to seek support from overseas capital. This not only facilitates the expansion and development of these enterprises but also drives the internationalization of the industry. The introduction of foreign professional investment institutions and industrial investors helps optimize the corporate shareholder structure and expands the visibility and influence of the companies in the international market. Simultaneously, this move also attracts more outstanding overseas research and development personnel and management, accelerating the global layout of these enterprises. As more companies join this trend, the power battery industry is poised to seize more collaboration opportunities on a global scale.
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