There are signs of China rationalizing its rapidly expanding battery manufacturing industry. Financial Times reports a ‘wave of consolidation’ is reflecting in cancelled investments, and even the demise of some smaller players. Is China consolidating the battery industry as part of a master plan, or is this due to push back from foreign customers?
Could Overseas Push Back Cause Battery Consolidation
Certainly we do know that leading western nations are feeling uncomfortable about over-relying on China for batteries. After all, their strategic importance is growing rapidly on the back of renewable energy. Or is China merely managing a critical point in the battery product life cycle?
There’s a distinct possibility that China is consolidating the battery industry on account of demand leveling out. Financial Times reports cancellation of nineteen battery gigafactory projects there in the first 7 months of 2024. Benchmark Mineral Intelligence links this to slowing electric vehicle sales
One Benchmark analyst suggests lower prices and lower monetary yields are causing these companies to shelve their expansion plans. The analyst predicts this pullback could reduce China’s 2030 gigafactory capacity by 3%. But is this, we wonder, solely due to slowing electric vehicle sales in the west?
Or Is China Consolidating Its Industry For Another Reason
Electric car sales in China could mirror the western experience of a 6% drop in revenue. Financial Times believes the Chinese electric car industry is ‘bracing for a similar rationalization’ after a ten year boom:
- Approximately 50 battery manufacturers currently supply the electric car market in China.
- Only the fittest may survive lower demand, technical challenges, and tighter government regulations.
Government Regulations May Help Rationalize The Industry
There are signs the government may be trying trying to cull the lower end of the market. China’s Ministry of Industry and Information Technology issued new battery quality regulations in June 2024.
These regulations set new standards for energy intensity, power density, cycle life and other battery specifications. This would certainly benefit the leading players in the game, while raising the bar for new entrants.
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