At the end of 2025, the power battery industry is reaching a new transformational juncture. On the one hand, expansion projects led by leading companies are continuously being launched; on the other hand, new battery projects, represented by solid-state batteries, are rapidly increasing in volume.

Following the explosive growth in the penetration rate of new energy vehicles, the power battery industry is still searching for new markets, and new application scenarios are constantly emerging. Interviewees told Securities Times reporters that the power battery industry’s capacity expansion is transitioning from widespread expansion to a period of concentration among leading companies. Currently, low-end production capacity remains oversupplied, while high-end capacity utilization is expected to gradually recover and improve. With increasing concentration in various aspects, including production capacity, the integration of power batteries with the market will become even closer, creating fertile ground for the growth of new technologies that meet diverse market demands.

Leading Companies Accelerate Capacity Expansion

“Capacity expansion” remains a key word for the power battery industry in the second half of the year, but this time the focus of this expansion is more concentrated.

On the evening of December 10th, CATL announced a partnership with Stellantis to build a battery factory in Zaragoza, Aragon, Spain. The battery factory is expected to have a total investment of €4.038 billion and an annual production capacity of 50GWh of power batteries, targeting Stellantis as a customer. This new plant will be CATL’s third production base in Europe.

On November 26, the first batch of battery cells were shipped from CATL’s Luoyang base, marking the official start of production at the base’s first battery cell production line. Earlier in October, local media reported that CATL’s other joint project with an automaker in Sichuan, the Geely Power Battery Production Base, had also completed the filing of its expansion plan, further increasing production capacity from its current scale.

On July 8, BYD announced that it had signed a contract with the Shenzhen-Shantou Special Cooperation Zone for the BYD Automotive Industrial Park Phase III project, with a total investment of 6.5 billion yuan, to build a battery pack line and a core parts factory for new energy vehicles. Additionally, Ganfeng Lithium and China New Energy Aviation also signed new project agreements in the third quarter of this year.

According to incomplete statistics from Gasgoo, in the third quarter of this year, power battery companies invested in 25 new projects domestically and internationally, with a total investment exceeding 99.1 billion yuan and a planned power battery production capacity exceeding 281 GWh. Eighteen projects are currently under construction (signed, announced, or planned).

“The recent expansion is different from previous years, when the expansion effort was overwhelming and investment was somewhat blind. Over the past two years, the threshold for expansion has become higher, and industry concentration has increased,” said Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of the North China University of Technology, in an interview with a Securities Times reporter. While some companies previously announced expansions to raise funds, the recent power battery expansions have been more focused on actual capacity expansions, even building factories overseas. These expansions have clearer goals and more defined industrialization plans.

Sustainability remains controversial.

Unlike previous years of frantic expansion, this round of expansion reflects a more pronounced industry differentiation. The Gaogong Industry Research Institute believes that in 2023, second- and third-tier companies will be the primary investors in lithium battery capacity expansion. In 2024, leading companies, such as CATL, will accelerate their expansion efforts. This shift is primarily due to the increasingly pronounced performance gap between leading companies and second- and third-tier companies, driven by the industry’s price war. With sufficient funds, leading companies have the capital and confidence to expand.

Some changes are also occurring in terms of project investment scale. Data from the Gaogong Industry Research Institute shows that only three projects worth over 10 billion yuan were announced between January and October 2024, with projects ranging from 1 billion yuan to 4.9 billion yuan accounting for the largest share, exceeding one-third. During this industry adjustment cycle, companies are becoming more cautious in their investment decisions, and their motivation to expand capacity is weakening.

As for whether the industry’s capacity expansion is sustainable, industry opinion remains divided. “Against the backdrop of overall overcapacity, I don’t believe leading companies will accelerate capacity expansion,” Mo Ke, founder of the Truth Research Institute, told reporters. Eliminating outdated production capacity and shifting related capacity based on shifting market trends are possible.

Moko believes there are two main solutions to overcapacity: one is to expand the market and expand overseas; the other is to enhance technological capabilities, either by making batteries cheaper or improving their performance. This will further develop the domestic market and also serve to expand the market.

“From the perspective of some new energy vehicle companies, to ensure product competitiveness, they prioritize leading battery suppliers.” A lithium battery industry insider told reporters that while the power battery industry as a whole does suffer from oversupply, much of the capacity can be considered “inefficient,” and leading companies hold a significantly higher market share than their competitors. Capacity utilization will be more focused on downstream supporting automakers and corresponding models, and outdated capacity will be automatically phased out at an accelerated pace. Therefore, this insider believes that expansion by leading companies will become a key industry trend.

Increasing Volume of New Battery Projects

While power battery production capacity undergoes structural adjustments, solid-state batteries, large cylindrical batteries, and fast-charging batteries, which meet market demand, are experiencing strong development momentum to meet fierce market competition.

Currently, solid-state batteries have once again become a hot topic in the market. Battery and automakers are accelerating their R&D efforts, and the industrialization of solid-state batteries is accelerating. Currently, many automakers and battery manufacturers have announced progress related to solid-state batteries. Nissan plans to launch a pilot plant in 2024, while Toyota and BMW aim to achieve mass production by 2030. CATL has increased its R&D investment in all-solid-state batteries this year, and its sulfide-based battery has recently entered the 20Ah sample trial production stage. Sunwoda’s third-generation polymer composite all-solid-state battery has completed laboratory verification and is expected to complete product development in 2025.

Industry insiders interviewed by reporters generally believe that while the industrialization progress and technological maturity of solid-state batteries remain to be seen, the direction of new battery technology represented by solid-state batteries is relatively clear. “Solid-state battery industrialization continues to accelerate, and it is expected to be widely used in various fields such as electric vehicles and energy storage in the future. Solid-state batteries may be a key breakthrough and development direction for OEMs and battery companies in the future,” a battery industry insider in East China told reporters.

In addition, there are also reports of industrialization of battery technology routes such as sodium batteries and large cylindrical batteries. Recently, several companies have announced the mass production of sodium-ion batteries. “People’s interest in new technologies stems from the pain points of current lithium-ion battery products, such as fast charging, long battery life, safety, high and low temperature performance, and high cost-performance. These factors are driving the industry to continuously break through and innovate, seeking better solutions.” Interviewees told reporters that as application scenarios continue to expand, different products will find different niches. For example, sodium batteries have great potential in cost-sensitive markets such as energy storage and two-wheeled electric vehicles. Solid-state batteries will gradually expand their presence in the power battery market as industrialization continues to increase.

Regarding the relationship between existing new battery technologies and production capacity and production lines, Mo Ke told reporters that the so-called solid-state batteries currently available are actually semi-solid-state batteries. New production lines are unnecessary; existing ones can simply be modified. Large cylindrical batteries also perform similarly given the current state of technology and the absence of disruptive technology.

“Battery production lines have also seen significant technological advancements. For production lines that offer sustainable improvement potential, some upgrades and renovations are performed almost annually. If these lines lack sustainable improvement potential, they do need to be demolished and rebuilt. Companies generally consider this in conjunction with capacity transfer, but the proportion of this area is likely to be small,” said Mo Ke.

New Application Scenarios Constantly Opening Up

After expanding into price, performance, and technology, power battery companies are still exploring new application scenarios.

Take CATL as an example. In June of this year, CATL announced that its collaborative project for a civilian electric manned aircraft is expected to support a range of approximately 2,000 to 3,000 kilometers by 2027-2028. In August, CATL signed a strategic investment and cooperation agreement with Fengfei Aviation, with CATL investing hundreds of millions of dollars exclusively to become a strategic investor in Fengfei Aviation. At its earnings conference, CATL also stated that it is continuously tracking and developing new application areas, including construction machinery, ships, and aircraft.

According to TrendForce’s latest research, with the development of flying cars, electric vertical take-off and landing (eVTOL), and urban air mobility (UAM), solid-state batteries are expected to become a mainstream battery technology for low-altitude aircraft. With the support of relevant national policies, global demand for solid-state batteries in the low-altitude flight market is expected to reach 86GWh in 2030 and further increase to 302GWh in 2035.

New application scenarios require new batteries, and new batteries in turn require the markets created by these scenarios. Some analysts point to emerging markets as potential destinations for solid-state batteries. These include battery swapping, specialty propulsion, eVTOL, and robotics.

Reporters noted that the correlation between power batteries and application scenarios is also increasing. In November, Hunan Province held a new energy power battery application scenario launch conference and supply and demand matching exchange meeting. Over 70 local new energy industry chain companies and application scenario-focused companies discussed innovative applications and market opportunities for new energy power batteries. The boundaries of power battery application scenarios are constantly being pushed, and power battery companies urgently need new application scenarios to open up new market growth space.

Experts interviewed stated that, judging from the development trends of the power battery industry, the concentration of the power battery market will further increase, the integration with the market end will become increasingly close, and the application scenarios of power batteries will continue to expand. Currently, leading companies are actively promoting electrification in various scenarios, such as the shipbuilding market, the construction machinery market, and the eVTOL market. For power battery companies in the industry adjustment period, they can strive to improve product quality, strengthen new technology research and development, and expand new application scenarios, so as to achieve corporate transformation and upgrading. Source: Securities Times