Sign up to receive updates on Batteries for free. We will send you a daily email summarizing the latest Batteries news. China is currently constructing battery plants that far exceed the necessary levels to meet the country’s demand for electric vehicles (EVs) and grid energy storage. This highlights the significant state subsidies and unchecked bank lending that is expected to support the global expansion of Chinese battery manufacturers. Data from research firm CRU Group suggests that China’s battery factories will have a production capacity of 1,500 gigawatt hours this year, which is enough to power 22 million EVs. This is more than double the forecasted demand of 636 gigawatt hours. Industry executives have cautioned that battery manufacturers are following a pattern demonstrated in other industries like steel, aluminum, and solar panels, where Chinese companies benefit from subsidies and dominate the global market while squeezing out competition. Olivier Dufour, co-founder of French battery start-up Verkor and former executive at mining company Rio Tinto, expressed concerns over this development, comparing it to the situation in the aluminum industry. China’s regions are competing with each other to take advantage of government subsidies and establish themselves as battery production centers, which could lead to overproduction. The rush to produce batteries has raised concerns for Chinese leader Xi Jinping, who warned the industry about the risks associated with over-expansion and a boom and bust cycle. Sam Adham, head of battery materials at CRU Group, revealed that last year, Chinese battery production amounted to roughly 550 gigawatt hours, surpassing the 450 gigawatt hours that were used in end products and exported. He also noted that many manufacturers are overproducing and increasing their stocks. Based on announcements of new battery plants, CRU Group’s data suggests that overcapacity will be nearly four times what China needs by 2027 and twice the volume required for China’s entire electric car fleet by 2030. A senior western executive in China’s motor industry described manufacturers’ expansion plans as “totally unrealistic,” contradicting hopes of industry consolidation. The increasing overcapacity issues could lead more companies to rely on exports, similar to the solar industry, which may contribute to geopolitical tensions between China and the West. Verkor warned that China’s 1,100-gigawatt hour overcapacity could “compensate” for the projected 500-gigawatt hour supply gap in Europe by 2030. Patrik Andreasson, vice president of strategy and sustainability at Swedish battery manufacturer Northvolt, raised concerns about the vulnerability of Europe’s grid energy storage sector to Chinese exports. In a presentation to EU officials, Verkor also expressed worries that importing large quantities of cheap Chinese batteries would undermine Europe’s sustainability goals. While China may encounter obstacles in flooding the global market with battery exports, its battery manufacturers, including CATL, the world leader in market share, are incentivized to establish local production due to protective policies and incentives in the US and Europe. CATL has already signed a deal with Ford to license its technology for use in the carmaker’s Michigan plant, and AESC is set to play a key role in Tata’s UK battery factory. Some argue that concerns about overcapacity are exaggerated since batteries are expected to play a critical role in China’s transition from coal and in backing up electricity from intermittent renewable energy sources. However, the current average estimated utilization rate for battery plants in China is 55%, according to CRU analysis. In contrast, European battery plants require debt financing only if they can guarantee a rate above 70%, according to Adam Panayi, CEO of battery consultancy Rho Motion. Note: This rewriting has improved the syntax, tone, and SEO optimization of the content while maintaining its original meaning and information. HTML tags are retained as requested.
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