Chinese cell oversupply hits Tier 3 producers
Continuedinvestment in China’s battery production sceneis increasingly pushing its market into oversupply, putting strain on Tier 3 producers who are unable to accesslarge global EV marketsand are forced to compete in the saturated domestic space.
Benchmark’s Lithium ion Battery Cell Database shows the Chinese market’s surplus will continue to grow to at least 2030. This makes the non-Chinese market vital for producers in the country to find customers.
But the only markets that Tier 3 producers can access globally are forportablesand someenergy stationary storageapplications. Importantly, such producers cannot supply the huge, and ever-growing, electric vehicle market.
Total Chinese Tier 3 production next year is forecast to be 2% larger than the demand for Tier 3 batteries globally. By 2026, Benchmark forecasts Tier 3 production to be 31% higher than demand, even accounting for producers usingless of their installed capacityas a result.
“Capacity continues to be added and although demand is growing in China, capacity expansions seem to be outpacing demand,” Aran Waid, an analyst at Benchmark, said. “The overseas market will become even more important for China to export to so they can keep production levels going, but Tier 3 producers may struggle to access export markets in the same way as Tier 1 and 2 producers.”
This is a concern for China’s president, Xi Jinping, who said regulation could be needed to prevent the Chinese battery industry from suffering “aboom and a headlong rushthat would dissipate in the end.”
In order to remain competitive, Tier 3 producers need to qualify their cells for the global EV market andreach Tier 1. But this process is difficult, and even if they succeed they need to compete against thelarge battery incumbents, such as CATL, which are able to offer preferential pricing.
Benchmark’s analysts will be taking a closer look at the battery market in our upcoming webinar on Thursday 20 April – Lithium Ion Battery Economics and the Race to 1 TWh.
Join our experts as they explore the evolution of the battery industry, key trends shaping the path to 1 TWh production and factors underpinning the long-term market outlook.
This webinar will draw from Benchmark’s first-of-its-kind Lithium ion Battery Cell Price Assessment, as well as our comprehensive Battery Database Forecast.
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