China’s electric vehicle (EV) battery industry is poised to encounter a significant overcapacity challenge in the coming years, potentially leading to the closure of numerous smaller players, warn industry analysts.
With nearly 50 Chinese battery manufacturers, the projected production capacity of 4,800 gigawatt-hours (GWh) of batteries in 2025 is four times the anticipated demand from the country’s EV makers, as forecasted by mainland online investment publication Gelonghui.
China’s EV Battery Faces Looming Overcapacity
The rapid growth in sales of electric vehicles in China, the world’s largest EV market, further complicates the situation.
UBS analyst Paul Gong predicts a 35% year-on-year rise in EV sales, reaching 8.8 million units this year.
Moreover, industry analysts estimate that EV adoption will exceed 10 million units in 2025, resulting in an excessive supply of batteries.
As Chinese battery manufacturers compete fiercely for a larger market share, major EV battery producers are rapidly expanding their production capabilities to gain a competitive edge in cost and price.
This aggressive expansion strategy reflects the intense competition and potential challenges the industry faces with an overabundance of battery supply.
Chinese battery makers have already emerged as leaders in the global market, with six out of the world’s top 10 EV battery producers based in China, according to Seoul-based SNE Research.
Companies like CATL, BYD, CALB, Gotion, Eve Energy, and Sunwoda command a significant 62.6% share of the global market, supplying 148.7 GWh of batteries to prominent automakers such as Tesla and Li Auto.
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Ford’s Partnership with Chinese Battery Manufacturer Under Scrutiny
However, the EV battery industry’s landscape faces further complexity as US lawmakers raise concerns over Ford Motor Company’s partnership with a Chinese battery manufacturer.
The lawmakers’ letter, sent to Ford CEO Jim Farley, questions the automaker’s collaboration with Contemporary Amperex Technology Co., Limited (CATL) due to its alleged troubling connection to the Chinese Communist Party and forced labor in Xinjiang.
Ford recently announced a $3.5 billion investment to build a low-cost battery factory in Michigan, with plans to license technology from CATL for its electric vehicles.
While Ford claims the partnership will create thousands of American jobs and promote sustainability and human rights, lawmakers have expressed concerns that a substantial portion of the jobs may go to citizens of the People’s Republic of China (PRC) rather than Americans.
Additionally, the letter raises questions about CATL’s involvement with companies in Xinjiang, known for their alleged forced labor practices.
Ford proposed licensing agreement with CATL, which aims to create at least 2,500 US jobs, has come under scrutiny due to concerns that several hundred jobs may be assigned to CATL employees from the PRC.
As China’s EV battery industry grapples with overcapacity concerns and global partnerships draw scrutiny, the future of the sector remains uncertain, and industry players must navigate an increasingly complex landscape.
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