Power batteries have become another important export industry for China, following photovoltaics and new energy vehicles（elecrtic vehicles）. With the global trend of adjusting the energy structure, the momentum in this industry is expected to continue.
Under the influence of international energy adjustment and climate change, the future growth of new energy vehicles has been determined. According to statistics from EV-Volumes, the global light car market contracted by 0.5% in 2022, but the new energy vehicle market grew by 55%. Despite the overall market contraction, new energy vehicles have performed remarkably well. At the same time, the Chinese new energy vehicle market and production volume are leading globally, making China the core of the world's new energy vehicle industry.
"Run" to the world along with new energy vehicles
Lithium batteries, motors, and electronic control systems are the three core upstream components of new energy vehicles, accounting for 50% of the total vehicle cost. Among these three key components, China has become a global leader in battery manufacturing, with Chinese power batteries being one of the country's "new three exports."
Following the rapid growth of new energy vehicles both domestically and internationally, upstream battery manufacturers are experiencing significant revenue growth. Currently, leading global battery companies are located in China, South Korea, and Japan. According to SNE Research, a South Korean new energy research institute, CATL (37.1%) and BYD (13.6%) from China are the top 2 battery manufacturers globally, together accounting for over 50% of the market share. Other major Chinese battery manufacturers, such as CALB (4%), Guoxuan High-Tech (2.8%), Sunwoda (1.7%), and Svolt (1.3%), rank among the top 10 globally. The market share of Korean companies is being overtaken by Chinese companies, reflecting China's strong expansion and leading position in the global battery industry.
Data released by the International Energy Agency (IEA) shows that China is the world's largest market for new energy vehicles. In 2022, new energy vehicles accounted for 29% of the total automotive market in China, with new registrations accounting for 60% globally. This number is expected to continue growing strongly in the coming years. Due to the development of the new energy vehicle market and strong support from the Chinese government, the IEA believes that the growth of new energy vehicles will be a major driving force in the Chinese automotive market.
The latest export data from May shows that, despite a decline in overall export figures, the automotive industry continues to experience strong growth, with new energy vehicles occupying a significant proportion. Currently, the main lithium batteries used in new energy vehicles are phosphate iron lithium-ion batteries and ternary lithium-ion batteries. According to Chinese media, the Securities Times, driven by multiple factors such as the overseas electric vehicle and energy storage markets, China's lithium battery exports reached 109.79 billion yuan in the first quarter of this year, a year-on-year increase of 94.3%. The cumulative export volume of power lithium batteries reached 25.8 GWh, with ternary lithium-ion batteries accounting for 72.6% and phosphate iron lithium-ion batteries accounting for 27.2% of the total exports. Due to the stimulation of North American and European new energy policies, the prosperity of this market is expected to continue.
Early industrial landscape to seize opportunities
The ability of Chinese battery companies to occupy an important position globally is not accidental. Take CATL（宁德时代）, jokingly referred to as the "Ning King（宁王）," as an example. After reaching a cooperation agreement with BMW in 2014, CATL established a subsidiary in Germany two years later. In 2017, when new energy vehicles were not yet popular, CATL set up wholly-owned subsidiaries in France, the United States, Canada, and Japan, establishing cooperative relationships with foreign automakers early on. In recent years, CATL's hedging strategy has proven effective due to the impact of global protectionist policies, allowing the company to establish a network of businesses and customers globally and supply its battery products to numerous global automakers. For example, after the introduction of protectionist policies in Europe, CATL quickly established a factory in Hungary to ensure the rapid supply of its products to German automakers, avoiding the heavy blow suffered by early photovoltaic companies.
Currently, Chinese battery suppliers have stable supply chains. When lithium prices soared in 2022, CATL developed sodium-ion batteries and announced at the 2023 Shanghai Auto Show that sodium-ion batteries would be put into use. However, as lithium prices fell after 2023, the motivation for new energy manufacturers to seek alternative resources weakened. Nevertheless, seeking alternative resources has become a trend, and it can be foreseen that Chinese battery suppliers will have more influence on resource price changes.
In the latest Morgan Stanley report, CATL, the Chinese battery giant, was given a negative outlook, causing widespread concern. One of the most important reasons for this is the uncertainty brought by the US "Inflation Reduction Act," as policy factors continue to loom as a sword hanging over the global expansion of Chinese battery companies. Currently, it is unlikely that China's battery industry will suffer the same fate as the photovoltaic industry, being caught unprepared and defeated by trade protectionism.