Is power battery overcapacity really coming? Lithium battery giants are turning to energy storage

New energy vehicles are replacing fuel vehicles at a devastating rate.

Globally, this is the need to decarbonize the transportation sector. For China, it has a deeper meaning, which is to get rid of dependence on oil imports and get rid of the control of fuel vehicle patents in Europe, the United States and Japan, and achieve lane change and overtaking.

Thanks to multiple factors such as policy support, corporate efforts and consumer favor, China has become the world's largest producer and consumer of new energy vehicles, as well as the world's largest exporter of new energy vehicles. China's new energy vehicles have been used for eight consecutive years. The production and sales volume ranks first in the world.

In 2022, my country's new energy vehicles will sell 6.887 million vehicles throughout the year, with the market share increasing to 25.6%, and global sales accounting for more than 60%.

The rapid development of new energy vehicles has also enabled the power battery market to achieve "rapid" growth.

Global power battery shipment data for 2022 released by SNE Research, an automotive market research institution, shows that the total global power battery installed capacity in 2022 will be 517.9GWh (gigawatt hours), of which China accounts for 60.4% of the global market share, compared with 2021 A significant increase of 48.2%.

Moreover, a large number of well-known companies have emerged, including CATL , BYD , AVIC Lithium Battery , Envision Power, Guoxuan Hi-Tech , Sunwanda , etc. CATL has even become the world's leading battery manufacturer with a market share of 37%, with a market value exceeding 1 trillion.

The hot market has led to a boom in investment. According to incomplete statistics from the media, at least 75 investment plans have been announced in the power battery field in 2022, with a total investment amount exceeding one trillion yuan.

However, as the east wind blows, risks are also approaching. Warnings of overcapacity continue to sound, and some vague signs indicate that with the large-scale expansion of production capacity, power batteries are undergoing new changes and differentiation is emerging, and the worry of overcapacity in power batteries is becoming more and more real.

01 Excess battery production capacity?

Experts have been warning about excess power battery industry since last year.

Ouyang Minggao, an academician of the Chinese Academy of Sciences, once said that China's battery production capacity may reach 3,000GWh in 2025, while shipments are only 1,200GWh, indicating obvious overcapacity.

Some organizations estimate that by 2025, the power battery production capacity required by China's new energy vehicle market will be approximately 1,000GWh to 1,200GWh. At present, the production capacity plans announced by battery manufacturers, vehicle manufacturers and other cross-border enterprises have reached 4800GWh, which is more than four times the expected required production capacity.

From the overall data point of view, this is a reminder of the excess in the power battery industry. Recent signs from some companies seem to confirm these judgments.

On March 6, Gasgoo learned that there were media reports that some employees had resigned due to insufficient orders from China Airlines.

In addition, an insider close to CATL told the media that CATL’s capacity utilization rate has also declined.

On January 11 this year, in response to investors' questions about "the company's current capacity utilization rate," CATL responded that according to the 2022 semi-annual report, the company's battery system capacity utilization rate was 81.25%.

Of course, the capacity utilization rate in 2022 has a lot to do with the epidemic, but it is true that the installed capacity of power batteries in CATL is declining. Data show that in January this year, CATL’s power battery installed capacity fell by 12% year-on-year, and CATL has continued to expand production capacity recently. Whether its capacity utilization rate will further decline is causing industry suspicion.

Some analysts say that the “ lithium ore rebate” plan recently launched by CATL is essentially “large-amount purchases + binding buyers” and is more similar to discount promotions in platform stores.

The worry of overcapacity is also closely related to the downward trend of downstream demand. Recent data shows that the installed volume of power batteries in vehicles is declining.

According to data from the China Automotive Power Battery Industry Innovation Alliance, in January this year, my country's power battery installed capacity was 16.1GWh, a year-on-year decrease of 0.3% and a month-on-month decrease of 55.4%.

The installed vehicle volumes of Guoxuan Hi-Tech, Yiwei Lithium Energy , Zhongxin Aviation, Lishen, Penghui Energy, and Honeycomb Energy all halved month-on-month.

In the whole year of 2022, the difference between my country's power battery production and vehicle installation volume will reach 251.3GWh. After deducting the export volume of 68.1GWh, there is still a difference of 183.2GWh. If these batteries are all inventory battery products, then the inventory battery will be It reached 62% of the annual battery installation volume.

Cui Dongshu, secretary-general of the Passenger Car Association, recently posted on his WeChat official account that among the current production of power batteries, the proportion of batteries installed in vehicles is constantly decreasing, resulting in overproduction and inventory pressure. According to the latest data from Gaogong Lithium Battery , in January 2023, domestic new energy vehicle sales were approximately 298,000 units, a year-on-year decrease of 8%; the installed capacity of power batteries was approximately 13.59GWh, a year-on-year decrease of 6%.

It is worth noting that these data began to rebound again in February. Sales of new energy vehicles in February increased by 55.9% year-on-year, and power battery installations increased by 60.4%.

However, industry analysts believe that this rebound may be related to the price war of new energy vehicles. After Tesla took the lead in detonating a price war at the beginning of the year , many car companies including BYD, Xpeng, and Ji Krypton have joined in. Price reductions and promotions seem to have become the main theme of the market in February.

02 Lack of high-quality overseas production capacity and a run on domestic inferior production capacity

The pressure of climate change has made countries demand to reduce carbon emissions, and the electrification transformation in the transportation field is accelerating. At present, the penetration rate of electric vehicles in the world's three major automobile markets (China, the United States and Europe) is constantly increasing.

The demand for electric vehicles has driven the demand for power batteries, and this momentum will definitely continue for some time.

Industry insiders told Global Zero Carbon that the current so-called overcapacity of power batteries in my country is more of a structural overcapacity, that is, insufficient high-end and high-quality production capacity, and overcapacity of low-end and inferior quality. Some power battery companies that have done a better job of globalization and low-carbonization will gain more market share.

As major countries in Europe and North America continue to strengthen the need to build local supply chains in key industries, such as the EU's Green Deal, the United States' Inflation Reduction Act (IRA), etc., all will have a negative impact on green development. Incentives and financing for technology and investment are combined with legal, regulatory and policy support. These new situations have also prompted more and more battery factories to expand overseas and realize the localization of the supply chain.

In addition, international car companies are accelerating their electrification transformation. More than 14 international car companies, including Daimler, Volvo, BMW, and General Motors, have successively formulated and released their own carbon reduction goals or "carbon neutrality" timetables. At this time, low-carbon technology solutions from battery suppliers are important.

Take Envision Power, the world's leading smart battery technology company, as an example. According to public reports and statistics, so far, Envision Power has won customers from many leading car companies, including BMW, Mercedes-Benz, Nissan, Honda and Renault. By 2026, Envision Power's global zero-carbon power battery production capacity will reach 400GWh.

In addition to Envision Power's rich international operating experience, this is also related to Envision's own carbon neutral system solution capabilities.

Envision Power's parent company, Envision Technology Group, is a company that has plans for new energy power generation, energy storage , power batteries and carbon management. In particular, the zero-carbon battery it launched is a major factor in Envision Power gaining favor from international customers.

In addition, forming joint relationships with vehicle manufacturers is also a way to obtain stable orders. On the one hand, there is the expansion of market demand, and on the other hand, the requirements for localized production capacity have increased, which has created a considerable gap in local production capacity.

Third-party research institutions predict that by 2028, the battery localization gap in North America and Europe will exceed 600GWh. The potential of emerging markets such as Southeast Asia, India, South America, and Africa cannot be ignored. Experts say that in the short and medium term, for at least five years, what is lacking in the market is not the total supply of batteries, but localized, high-quality, green power battery production capacity.

Zhang Jihong, director of the Environmental Technology and Economics Branch of the China Society of Technical Economics, said that China's power battery industry has a structural shortage problem. For a long time, China's power battery overcapacity has been mainly concentrated in low-end production capacity, while high-end production capacity is still seriously insufficient.