China to Limit Excessive Production Expansion in Lithium Battery Industry

China’s Ministry of Industry and Information Technology (MIIT) released two draft guidelines on the lithium battery sector for public consultations, aiming to propel technical progress, improve product quality, and reduce manufacturing costs in the industry, as reported by Caixin on November 19. One of the draft documents noted that battery producers should put capacity expansion on hold if they made use of less than 50% of the production capacity in the previous year. Additionally, the two drafts listed several technical standards, such as the minimum energy density and cycle life for batteries, while the use of solar power is also encouraged in the process of cell manufacturing to reduce power consumption. According to MIIT, the guidelines are not mandatory.

China’s electric vehicle (EV) battery sales amounted to 106.8 gigawatt-hours (GWh) from January to September 2021, surging 176.9% YoY with the booming demand from the EV industry. Therefore, Contemporary Amperex Technology (CATL) [300750:CH] and China Aviation Lithium Battery Technology (CALB) have all unveiled their ambitious capacity expansion plans recently. The new guidelines can hardly influence these battery giants attributed to their high-class and hot-selling products. During the first five months of 2021, China’s top three, top five, and top ten battery producers took up 73.3%, 83.2%, and 91.8% of the total installed battery capacity, respectively, according to Caixin. The intensive competition among the battery producers would lead to the standardization and concentration of the battery industry, citing a market insider.

Sources:

https://www.caixin.com/2021-11-19/101807156.html

https://www.argusmedia.com/en/news/2275094-china-unveils-plans-to-curb-excessive-battery-growth

https://auto.cctv.com/2021/10/13/ARTIRVCLf8uCGdbf4jqV4XPB211013.shtml