The China battery market is expected to grow at a CAGR of greater than 10% during the forecast period of 2020 - 2025. Major factors driving the market include declining lithium-ion battery prices, rapid adoption of electric vehicles, growing renewable sector, and increased sales of consumer electronics. On the other hand, the demand-supply mismatch of raw materials is likely to hinder the market growth.
- Automotive batteries segment is expected to witness significant growth during the forecast period, owing to the increasing demand from new vehicles produced in the country.
- Plans to integrate renewable energy with the national grids in is expected to create a significant amount of opportunity for the lithium-ion battery manufacturers and suppliers in the near future.
- Declining lithium-ion battery prices is likely to be one of the significant factors driving the battery market in China during the forecast period.
Key Market Trends
Automotive Batteries Segment to Witness Significant Demand
- The automotive sector is expected to be one of the major end-user segments for lithium-ion batteries soon. The penetration of electric vehicles is anticipated to provide a massive impetus for the lithium-ion battery industry growth.
- Automobile uses a battery as a secondary power unit, to power its components or supports the engine while cranking. Lead-acid batteries and Nickel metal-hydride batteries are primarily used in conventional automobiles, while lithium-ion batteries are used in electric vehicles.
- The EV industry has adopted the lithium-ion batteries due to the same reasons for which these batteries are used in consumer electronics. The fast growth of the EV industry in recent years has resulted in the automobile sector replacing the consumer electronics sector as the leading consumer of the lithium-ion batteries.
- China remained the world's largest electric car market with nearly 1.1 million electric cars sold in 2018, and with 2.3 million units, it accounted for almost half of the global electric car stock. Furthermore, the Chinese Government has set New Energy Vehicles (NEV) share mandates of 10% for 2019 and 12% for 2020. Non-Chinese brands account for approximately 50% of the total passenger car sales. Most of these cars are produced in China, in joint ventures (J/Vs) with Chinese companies.
- As of 2018, foreign automakers faced a 25% import tariff, or they were required to build a factory in China with a cap of 50% ownership. The 50% factory ownership rule is likely to be relaxed in 2020. Electric vehicle makers are expected to be the first to benefit from this change, thus increasing the demand for automotive batteries segment.
- Therefore, based on the above-mentioned factors, automotive batteries are expected to witness significant growth for battery market in China during the forecast period.
Declining Lithium-ion Battery Prices to Drive the Market
- An increase in production volume, particularly in China, helped in achieving the economies of scale in lithium-ion battery manufacturing. In addition to these, the large capacity additions also increased the competition among manufacturers, further declining the prices, but at the expense of the profitability of the manufacturers.
- The battery manufacturers in Asia-Pacific, particularly in China, have even lower prices than the global average prices. One of the major causes of lower prices in China is lower labor costs. Hence, lithium-ion batteries are expected to dominate the overall battery market over the next ten years, as they are widely used in cell phones, tablets, and laptops, among other gadgets, whose demand has been increasing at a significant rate, globally, especially in countries like China, India, etc.
- The share of China in lithium-ion battery manufacturing is growing rapidly with manufacturers, like CATL, registering the highest revenue and battery production growth among the top lithium-ion battery manufacturers. The increasing share of China in the lithium-ion battery manufacturing is expected to support a further decline in the Li-ion battery costs.
- This sharp and sustained cost reduction is expected to help cement lithium-ion as the battery chemistry of choice in all energy storage markets, including grid-scale, behind-the-meter storage, residential storage, and micro-grids. Additionally, falling battery prices are expected to bring price-competitive electric vehicles to all the major light-duty vehicle segments before 2030, ushering in a period of intense growth for electric vehicles.
- Hence, the continuous declining cost, leading to the widespread use of lithium-ion batteries is expected to drive the market growth during the forecast period.
The China battery market is fragmented. Some of the major players includes Contemporary Amperex Technology Co. Limited, GS Yuasa International Ltd., TianJin Lishen Battery Joint-Stock Co. Ltd, C&D Technologies, Inc., and East Penn Manufacturing Co. Inc.
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