China’s EV battery factory build-out set to swamp global market

Sep. 11, 2023

Chinese dominance of the mine-to-megawatt supply chain

The $430 billion US Inflation Reduction Act has a lit a fire under US plans to build battery factories onshore and establish a global supply chain for electric cars with the help of friendly countries. The EU’s response, the Green Industrial Plan, is equally ambitious and no less generous.

The push comes as the US pursues policies under the IRA and other programs, like the Bipartisan Infrastructure Law, to reduce its reliance on China. In over little more than a decade the country has come to completely dominate the EV market by taking control of all aspects of the mine to megawatt supply chain.

Data from the Adamas Intelligence EV Battery Capacity and Battery Metals Tracker show that the top 3 Chinese cell suppliers by MWhs deployed onto the world’s roads – CATL, BYD and CALB – alone enjoyed 50% market share in the first half of 2023.

Now a new report in the Financial Times throws another spanner in the friendshoring works. Despite China’s already tight grip on battery manufacture, construction and commissioning of new plants in the nation are only accelerating. Production capacity in China is expected to reach a towering 1,500 GWh this year, boosted in no small part by subsidies from central and local governments.

Evidence suggests China is increasingly exporting its excess capacity

To put that in perspective, only 146 GWh were deployed in the battery and hybrid EVs leaving showrooms in China during the first half of the year, Adamas data shows. And China was responsible for half the global total.

While some of the China-made gigawatt hours will end up in stationary storage, the ESS market today remains small compared to that of EVs. No wonder then that according to the FT report, capacity utilization in China averages only around 55%.

While trade barriers – and fear of further restrictions and deterioration of Washington and Beijing’s relations – have made it very difficult for Chinese EV and battery makers to penetrate the US market (you’re more likely to find a Chinese-made golf cart in the US than an EV), evidence suggests China is increasingly exporting its excess capacity.

Analysis of data in the Adamas tracker point to a large and growing share for Chinese EV makers in Europe, which has proven an easier market to penetrate than the US to-date. In June of this year, 20% of the MWhs delivered to EV buyers in Europe, including hybrids, were contained in China-made EVs and packs. In absolute numbers, the battery power exported to Europe from China grew more than 70% year-on-year.

The fact that a good chunk of those sales was Tesla Model Ys and 3s made in the Texas-based company’s Shanghai factory also points to the fact that disentangling global electric car supply chains would be a momentous task. And whether this trend is beneficial for anyone in the US, China or Europe other than those doling out subsidies, grants and soft loans, or pursuing mercantile trade policies, is another question altogether.


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