Challenges in Power Battery Supply & Demand
Table of Contents
- Challenges in Power Battery Supply & Demand
- Global Rise of Electric Vehicles and Impact on Power Batteries
- How Lithium Carbonate Price Fluctuations Influence the Battery Sector
- China’s Power Battery Industry: Production and Demand in 2023
The global automotive landscape is undergoing a significant transformation with the rise of electric vehicles (EVs), driven by efforts to cut down oil consumption, curb environmental pollution, and reduce carbon emissions. This shift has led to a substantial impact on the power battery sector. For example, China’s ambitious target set on October 20, 2020, aims for EVs to constitute about 20% of new car sales by 2025, with a vision to make all-electric vehicles the mainstream in new vehicle sales by 2035. This move is complemented by a full transition to electric vehicles in public transport. Similarly, the United States, through its Clean Energy Revolution and Environmental Plan in 2020 and New Infrastructure Plan in 2021, is actively promoting EV development, targeting a 50% market share for new energy vehicles by 2030.
Global Rise of Electric Vehicles and Impact on Power Batteries
In recent years, major economies worldwide have been setting goals for electrification to reduce oil consumption, environmental pollution, and carbon emissions. For example, on October 20, 2020, China set a goal for electric vehicles (EVs) to make up about 20% of new car sales by 2025 and for all-electric vehicles to become the mainstream in new sales by 2035, along with full electrification in public transportation. Similarly, the United States, through its 2020 Clean Energy Revolution and Environmental Plan and 2021 New Infrastructure Plan, has been encouraging the development of EVs, aiming for a 50% penetration rate of new energy vehicles by 2030.
Under these global initiatives, the sales of new energy vehicles have been consistently rising. From 2016 to 2021, global sales of these vehicles grew from 790,000 to 6.75 million units, representing an annual compound growth rate of 53.58%. The market penetration also increased from 0.9% to 8.3%. According to the China Association of Automobile Manufacturers, in 2022, China’s new energy vehicle sales reached 6.887 million units, up 93.4% year-over-year, with a penetration rate of 25.6%. The European Automobile Manufacturers Association reports that in 2022, Europe saw 2.589 million new energy passenger vehicle registrations, up 14.6% from the previous year, with a penetration rate of 22.9%. The American Automotive Innovation Alliance noted that in 2022, the U.S. had sales of 913,000 new energy light vehicles, up 41.1% year-over-year, with a penetration rate of 6.7%.
The rapid growth in new energy vehicles has driven the power battery market. According to SNEResearch, in 2022, the global usage of new energy vehicle power batteries reached 517.9 GWh, up 71.8% year-over-year. The total global shipments of power batteries and energy storage batteries reached 812 GWh.
In China, in 2021, the production of power batteries was 219.7 GWh, up 163.4% year-over-year; sales were 186 GWh, up 182.3%; and installation was 154.5 GWh, up 142.8%. In 2022, China’s power battery production reached 545.9 GWh, up 148.5% year-over-year.
In terms of installation, in 2022, China’s power battery installation volume was 294.6 GWh, up 90.7% year-over-year.
How Lithium Carbonate Price Fluctuations Influence the Battery Sector
By the end of 2022, the price of battery-grade lithium carbonate had soared to 600,000 yuan per ton but has since fallen below 170,000 yuan, a drop of over 70%. As of November 7, the average price in the domestic market for battery-grade lithium carbonate continued to decline, reaching 166,800 yuan per ton, which is a 1.77% decrease since the beginning of the month.
Effect on Lithium Mining Companies and Battery Manufacturers
The sharp decline in lithium prices has notably impacted the performance of lithium mining companies. On the other hand, this price drop has freed up profit margins for battery companies. For instance, Contemporary Amperex Technology Co. Limited (CATL) reported a revenue of 294.677 billion yuan for the first three quarters of 2023, up 40.10% year-on-year. Their net profit attributable to the parent company was 31.145 billion yuan, an increase of 77.05% year-on-year. Specifically, in the third quarter, they achieved a revenue of 105.431 billion yuan, up 8.28% year-on-year, with a net profit of 10.428 billion yuan, increasing by 10.66%. Another company, EVE Energy, reported revenue of about 35.529 billion yuan for the first three quarters of 2023, a 46.31% increase year-on-year, and their net profit attributable to shareholders was about 3.424 billion yuan, up 28.47% year-on-year.
China’s Power Battery Industry: Production and Demand in 2023
China’s Power Battery Industry Growth in 2023
According to the China Automotive Power Battery Industry Innovation Alliance, from January to July 2023, China produced a total of 354.6 GWh of power batteries, a 35.4% increase compared to the same period last year. The cumulative installed capacity reached 184.4 GWh, showing a 37.3% year-over-year increase. Specifically, in July 2023, China’s power battery production was 61.0 GWh, up by 28.9%, and the installation volume reached 32.2 GWh, a 33.3% increase from the previous year.
Supply and Demand Growth in the First Seven Months of 2023
The industry data for the first seven months of 2023 indicates that supply and demand growth were relatively synchronized. However, in the first half of 2023, Contemporary Amperex Technology Co. Limited (CATL) had a capacity utilization rate of only 60.5%, the lowest in its history, compared to 95% in 2021. Another industry giant, BYD (stock code 002594), planned for a power battery capacity of 110 GWh in 2022 but achieved an actual output of 89.84 GWh, with a capacity utilization rate of 81.67%.
The global surge in electric vehicle adoption is not only reshaping transportation but also significantly influencing the power battery industry. The remarkable growth in EV sales has catalyzed the demand for power batteries, with a notable increase in production and installation volumes, especially in China. However, this rapid expansion has led to challenges, such as the excess supply over demand, as evidenced by reduced capacity utilization rates in major battery manufacturers like CATL and BYD. Additionally, the fluctuating prices of lithium carbonate, a key component in battery production, have had a substantial impact on both lithium mining companies and battery manufacturers, affecting profit margins and competitive dynamics in the sector. As the industry continues to evolve, it faces the dual task of managing supply-demand balances and adapting to price changes, all while driving forward the clean energy revolution.