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The Battery Industry is Undergoing a Global Transformation!
In 2024, after experiencing suspension, production cuts, and a sharp decline in performance last year, China's energy storage industry is undergoing profound changes. The gradual recovery of overseas markets will also bring more opportunities for energy storage companies with overseas businesses, especially those with innovative R&D capabilities.
As we all know, in the great technological revolution, the decisive battles before dawn are often the most brutal, and their strategic successes or failures often have the most decisive impact on the future of the industry.
Chinese Battery Companies Breaking Out of Predicaments
As the battery industry entered a "cooling period," with low prices for upstream lithium-ion materials, many listed companies faced pressure on their performance or even losses. At the same time, the Ministry of Industry and Information Technology also signaled guidance for lithium-ion companies to reduce capacity expansion. Faced with this situation, Chinese battery companies are actively seeking breakthroughs through multiple paths, including technological innovation, changing tracks, and going global, to find new growth points.
In terms of technological innovation, from increasing energy density and reducing costs to improving safety and extending lifespan, technological innovation has become the key for battery companies to break through. Recently, Yang Hongxin, Chairman and CEO of Honeycomb Energy Technology Co., Ltd., stated that the cost reduction process for power batteries will continue, with the main paths including manufacturing cost reduction, process cost reduction, and cost reduction through changes in battery form factors.
Regarding the growth drivers for power batteries and electric vehicles in the next stage, Yang Hongxin believes that in the next 2-3 years, the growth rate of range-extended and high-capacity PHEVs (plug-in hybrid electric vehicles) will surpass that of pure electric vehicles and become a new growth point. Globally, HEVs (hybrid electric vehicles) are very popular in markets like Europe, the United States, Japan, and South Korea due to their ability to adapt to areas with underdeveloped charging facilities, and they will also experience rapid growth in the future. The rapid rise of these downstream demands has placed higher requirements on electrolyte performance, heat resistance of electronic components, heat dissipation capabilities, and more, which will become new R&D directions for battery engineers.
At the same time, battery companies are also actively seeking new market opportunities. With the rapid growth in demand for the energy storage market, some companies have begun to shift their business focus to the energy storage field and have launched high-capacity cells to meet the needs of larger-scale power stations and longer-duration energy storage. To ensure that high-capacity cells achieve a balance in terms of size limitations, capacity, and safety, battery companies have not only chosen the thinner "blade" form factor but have also collectively transitioned to stacked manufacturing processes.
Moreover, facing market saturation and competition domestically, an increasing number of battery companies are seeking overseas development by establishing R&D centers and production bases abroad to better adapt to international market demands and achieve localized production and sales.
In fact, many battery giants are accelerating their overseas capacity layout. According to incomplete statistics from China Energy Storage Network, as of now, battery giants such as CATL, EverEnergy, BYD, and CALB have established in-depth industrial layouts overseas. Their disclosed/reported overseas production capacity under construction or planned has exceeded 720GWh.
It is foreseeable that in the future, whoever completes global layout earlier will be more likely to have the power and historical opportunity to change or reshape the new industrial landscape.
The U.S. Market is a Variable
For Chinese battery companies, the U.S. market is a variable market.
From the U.S. Inflation Reduction Act stipulating that electric vehicles equipped with batteries made in China cannot enjoy tax credits, to the U.S. House and Senate passing the 2024 National Defense Authorization Act that explicitly prohibits the U.S. Department of Defense from procuring batteries produced by six Chinese battery companies, the U.S. restrictions on Chinese battery companies are gradually escalating. Even for lithium-ion batteries used in energy storage, there is a window of less than two years remaining.
Additionally, it cannot be ruled out that the next U.S. administration will continue to escalate the ban or have limited exclusions, which will put tremendous pressure on the massive production capacity of Chinese battery companies. Some Chinese battery manufacturers are already facing the significant risk of losing the entire U.S. market.
Currently, the U.S. is working to establish a domestic battery supply chain and is trying its best to exclude Chinese battery companies, making South Korean and Japanese battery companies their preferred partners.
Since the beginning of this year, in addition to Samsung SDI planning to build a power battery joint venture plant in Indiana, SKOn and LG Energy Solution have also accelerated their new layouts in the U.S. market.
On April 4th of this year, LG Energy Solution announced that construction has begun on its planned $5.5 billion battery plant in Arizona, which is expected to start production in 2026.
LG Energy Solution stated that it plans to produce 46 series cylindrical batteries for electric vehicles and lithium iron phosphate soft-pack batteries for energy storage systems at the new plant, with an expected annual production capacity of 36GWh and 17GWh, respectively. This is LG Energy Solution's second independent plant in the U.S.
Meanwhile, SKOn operates two battery plants in Commerce, Georgia. The company's joint venture with Ford, BlueOvalSK, operates two battery plants in Glendale, Kentucky, and one plant in Stanton, Tennessee, which are expected to start production in 2025. Additionally, SKOn, through its joint venture with Hyundai Motor Company, is building a battery plant in Bartow, Georgia.
In July of this year, Panasonic Energy of North America (PENA) announced that its battery plant in Sparks, Nevada, has successfully delivered 10 billion lithium-ion cells. Since its establishment in 2015, PENA has now grown to have 13 production lines with a daily output of 5.5 million cells.
Obviously, compared to Chinese battery companies facing obstacles in developing the U.S. market, Japanese and South Korean battery companies have taken full advantage of the favorable conditions in the U.S. market. Although the U.S. electric vehicle market demand has temporarily declined in 2024, the energy storage market has maintained rapid growth.
In the long run, the U.S. power battery and energy storage battery markets have enormous room for growth, which means that even if Japanese and South Korean battery companies experience temporary downturns in performance, the strong U.S. market will continue to support their continuous recovery and development.
The "Carbon Neutrality" War Has Arrived
It is worth noting that in order to seize the dominance and pricing power of the future new energy industry, Western countries have sounded the call for a "carbon neutrality" war.
For example, at the end of 2022, the European Parliament and the European Council confirmed that the European Union's Carbon Border Adjustment Mechanism (CBAM) will begin a trial run in October 2023, officially levy charges in 2026, and be fully implemented before 2034, making the EU the first economic entity in the world to impose a "carbon tax."
Following closely behind the EU, the Japanese Ministry of Economy, Trade and Industry and the Ministry of the Environment jointly officially released the "Carbon Footprint Practical Guide" in May 2023. Electric vehicles are eligible for subsidies by disclosing information on their battery carbon footprint, and the government will set emission limits. Vehicles exceeding that limit will not be eligible for subsidies. The relevant policies are basically consistent with the new EU Battery Regulation and will be implemented in phases.
It is foreseeable that in the next few years, more countries will establish trade rules and barriers, and global competition will only intensify. This trend also reminds us that the battery industry is undergoing a global transformation, and behind this transformation is the interplay of economic policies and strategic layouts among multiple countries.
Facing the future of the battery industry, all parties should actively adapt to the new market environment to avoid falling behind in this competition. Whether it is national policymakers, enterprises, or users, they will all release their energy in this technological and economic revolution, and we look forward to seeing how Chinese companies will seize the opportunities for high-quality development in this global transformation.
In 2024, after experiencing suspension, production cuts, and a sharp decline in performance last year, China's energy storage industry is undergoing profound changes. The gradual recovery of overseas markets will also bring more opportunities for energy storage companies with overseas businesses, especially those with innovative R&D capabilities.
As we all know, in the great technological revolution, the decisive battles before dawn are often the most brutal, and their strategic successes or failures often have the most decisive impact on the future of the industry.
Chinese Battery Companies Breaking Out of Predicaments
As the battery industry entered a "cooling period," with low prices for upstream lithium-ion materials, many listed companies faced pressure on their performance or even losses. At the same time, the Ministry of Industry and Information Technology also signaled guidance for lithium-ion companies to reduce capacity expansion. Faced with this situation, Chinese battery companies are actively seeking breakthroughs through multiple paths, including technological innovation, changing tracks, and going global, to find new growth points.
In terms of technological innovation, from increasing energy density and reducing costs to improving safety and extending lifespan, technological innovation has become the key for battery companies to break through. Recently, Yang Hongxin, Chairman and CEO of Honeycomb Energy Technology Co., Ltd., stated that the cost reduction process for power batteries will continue, with the main paths including manufacturing cost reduction, process cost reduction, and cost reduction through changes in battery form factors.
Regarding the growth drivers for power batteries and electric vehicles in the next stage, Yang Hongxin believes that in the next 2-3 years, the growth rate of range-extended and high-capacity PHEVs (plug-in hybrid electric vehicles) will surpass that of pure electric vehicles and become a new growth point. Globally, HEVs (hybrid electric vehicles) are very popular in markets like Europe, the United States, Japan, and South Korea due to their ability to adapt to areas with underdeveloped charging facilities, and they will also experience rapid growth in the future. The rapid rise of these downstream demands has placed higher requirements on electrolyte performance, heat resistance of electronic components, heat dissipation capabilities, and more, which will become new R&D directions for battery engineers.
At the same time, battery companies are also actively seeking new market opportunities. With the rapid growth in demand for the energy storage market, some companies have begun to shift their business focus to the energy storage field and have launched high-capacity cells to meet the needs of larger-scale power stations and longer-duration energy storage. To ensure that high-capacity cells achieve a balance in terms of size limitations, capacity, and safety, battery companies have not only chosen the thinner "blade" form factor but have also collectively transitioned to stacked manufacturing processes.
Moreover, facing market saturation and competition domestically, an increasing number of battery companies are seeking overseas development by establishing R&D centers and production bases abroad to better adapt to international market demands and achieve localized production and sales.
In fact, many battery giants are accelerating their overseas capacity layout. According to incomplete statistics from China Energy Storage Network, as of now, battery giants such as CATL, EverEnergy, BYD, and CALB have established in-depth industrial layouts overseas. Their disclosed/reported overseas production capacity under construction or planned has exceeded 720GWh.
It is foreseeable that in the future, whoever completes global layout earlier will be more likely to have the power and historical opportunity to change or reshape the new industrial landscape.
The U.S. Market is a Variable
For Chinese battery companies, the U.S. market is a variable market.
From the U.S. Inflation Reduction Act stipulating that electric vehicles equipped with batteries made in China cannot enjoy tax credits, to the U.S. House and Senate passing the 2024 National Defense Authorization Act that explicitly prohibits the U.S. Department of Defense from procuring batteries produced by six Chinese battery companies, the U.S. restrictions on Chinese battery companies are gradually escalating. Even for lithium-ion batteries used in energy storage, there is a window of less than two years remaining.
Additionally, it cannot be ruled out that the next U.S. administration will continue to escalate the ban or have limited exclusions, which will put tremendous pressure on the massive production capacity of Chinese battery companies. Some Chinese battery manufacturers are already facing the significant risk of losing the entire U.S. market.
Currently, the U.S. is working to establish a domestic battery supply chain and is trying its best to exclude Chinese battery companies, making South Korean and Japanese battery companies their preferred partners.
Since the beginning of this year, in addition to Samsung SDI planning to build a power battery joint venture plant in Indiana, SKOn and LG Energy Solution have also accelerated their new layouts in the U.S. market.
On April 4th of this year, LG Energy Solution announced that construction has begun on its planned $5.5 billion battery plant in Arizona, which is expected to start production in 2026.
LG Energy Solution stated that it plans to produce 46 series cylindrical batteries for electric vehicles and lithium iron phosphate soft-pack batteries for energy storage systems at the new plant, with an expected annual production capacity of 36GWh and 17GWh, respectively. This is LG Energy Solution's second independent plant in the U.S.
Meanwhile, SKOn operates two battery plants in Commerce, Georgia. The company's joint venture with Ford, BlueOvalSK, operates two battery plants in Glendale, Kentucky, and one plant in Stanton, Tennessee, which are expected to start production in 2025. Additionally, SKOn, through its joint venture with Hyundai Motor Company, is building a battery plant in Bartow, Georgia.
In July of this year, Panasonic Energy of North America (PENA) announced that its battery plant in Sparks, Nevada, has successfully delivered 10 billion lithium-ion cells. Since its establishment in 2015, PENA has now grown to have 13 production lines with a daily output of 5.5 million cells.
Obviously, compared to Chinese battery companies facing obstacles in developing the U.S. market, Japanese and South Korean battery companies have taken full advantage of the favorable conditions in the U.S. market. Although the U.S. electric vehicle market demand has temporarily declined in 2024, the energy storage market has maintained rapid growth.
In the long run, the U.S. power battery and energy storage battery markets have enormous room for growth, which means that even if Japanese and South Korean battery companies experience temporary downturns in performance, the strong U.S. market will continue to support their continuous recovery and development.
The "Carbon Neutrality" War Has Arrived
It is worth noting that in order to seize the dominance and pricing power of the future new energy industry, Western countries have sounded the call for a "carbon neutrality" war.
For example, at the end of 2022, the European Parliament and the European Council confirmed that the European Union's Carbon Border Adjustment Mechanism (CBAM) will begin a trial run in October 2023, officially levy charges in 2026, and be fully implemented before 2034, making the EU the first economic entity in the world to impose a "carbon tax."
Following closely behind the EU, the Japanese Ministry of Economy, Trade and Industry and the Ministry of the Environment jointly officially released the "Carbon Footprint Practical Guide" in May 2023. Electric vehicles are eligible for subsidies by disclosing information on their battery carbon footprint, and the government will set emission limits. Vehicles exceeding that limit will not be eligible for subsidies. The relevant policies are basically consistent with the new EU Battery Regulation and will be implemented in phases.
It is foreseeable that in the next few years, more countries will establish trade rules and barriers, and global competition will only intensify. This trend also reminds us that the battery industry is undergoing a global transformation, and behind this transformation is the interplay of economic policies and strategic layouts among multiple countries.
Facing the future of the battery industry, all parties should actively adapt to the new market environment to avoid falling behind in this competition. Whether it is national policymakers, enterprises, or users, they will all release their energy in this technological and economic revolution, and we look forward to seeing how Chinese companies will seize the opportunities for high-quality development in this global transformation.
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