First, on August 17th, the EU Batteries and Waste Batteries Regulation (hereinafter referred to as the “New Battery Regulation”), governing the production and import of batteries in the EU, officially came into effect.<\/p>\n
Followed by this, on September 13th, the European Commission launched an anti-subsidy investigation into whether to impose punitive tariffs on Chinese electric vehicles entering the European market.<\/p>\n
A power battery industry insider explained to Titanium Media App that the New Battery Regulation primarily addresses the battery passport, which requires disclosure of a wide range of information, most importantly its carbon footprint. While vehicle manufacturers are most directly impacted by anti-subsidy measures, power battery companies, as upstream suppliers in the supply chain, will inevitably need to coordinate with their customers to consider localization plans in Europe if anti-subsidy measures are established and implemented.<\/p>\n
For Chinese power battery companies, the successive policies mean that exporting is becoming increasingly difficult, making the need for overseas production facilities even greater than before.<\/p>\n
To date, domestic power battery manufacturers such as CATL, Sinotruk, Guoxuan High-tech, EVE Energy, Honeycomb Energy, and Sunwoda have all announced their overseas expansion plans, with the majority opting for European and American factories. According to relevant statistics, as of June 15th, Chinese battery companies accounted for over half of the 50 lithium battery factory projects announced by the European Union. Regarding overseas production capacity deployment, my country has already established 25 overseas projects with a planned capacity exceeding 500GWh.<\/p>\n
Amidst increasingly stringent policy barriers, how can domestic power battery companies explore new opportunities in the international market? What challenges will they face in their overseas expansion?<\/p>\n
Going Overseas<\/p>\n
“Lithium batteries, solar cells, and electric vehicles have become the ‘new three’ exports this year,” said Wan Gang, Chairman of the China Association for Science and Technology, at the 2023 World Power Battery Conference.<\/p>\n
The semi-annual reports of various power battery companies clearly show that “going global” is becoming a new driving force for their business growth.<\/p>\n
In the first half of this year, CATL’s overseas revenue reached 65.684 billion yuan, a year-on-year increase of 195.15%; Guoxuan High-tech’s overseas revenue was 3.062 billion yuan, a year-on-year increase of 296.74%; and Sinotruk’s overseas revenue was 375 million yuan, compared to only 174 million yuan in the same period last year, a year-on-year increase of 115.7%. Its overseas market share increased from 1.9% in the same period of 2022 to 3%.<\/p>\n
Shipment of products overseas is just one approach. This year, several companies, including Envision Power, Sinotruk, CATL, Honeycomb Energy, Guoxuan High-tech, and EVE Energy, have announced further overseas investment plans.<\/p>\n
Sinotruk announced earlier this year that it would locate its first European power battery factory in Portugal. The factory will produce electrode sheets, battery cells, assembly, packaging, and battery casings. It is expected to start production by the end of 2025, with an annual production capacity of 15GWh.<\/p>\n
On June 7, Envision Power broke ground on its battery factory in South Carolina, USA. According to official information, the factory is powered by 100% clean energy and is scheduled to begin production in 2026.<\/p>\n
In July, Honeycomb Energy announced the official start of construction on its module and pack plant in Thailand, with completion expected by the end of 2023. Based on local customer demand, Honeycomb Energy’s Thailand plant is currently planning two production lines: HEV modules and PHEV\/BEV module + pack.<\/p>\n
On August 7, EVE Energy held a groundbreaking ceremony for its Malaysia plant. Reportedly, the Malaysia plant, also EVE Energy’s 53rd plant, represents an investment of no more than US$420 million. Located in Kulim, Kedah, Malaysia, the plant will primarily produce 21700 cylindrical batteries for power tools and electric two-wheelers.<\/p>\n
Two days later, Sunwoda Power Technology Co., Ltd., a subsidiary of Sunwoda, invested approximately RMB 1.9 billion in Hungary through its subsidiary, Hungarian Sunwoda Power Technology Co., Ltd., to build the first phase of its new energy vehicle power battery plant.<\/p>\n
On September 9th, Gotion High-Tech’s wholly-owned subsidiary, Gotion USA, announced it would construct a 40GWh battery factory in Manteno Township, Kankakee County, Illinois, USA. The Gotion Illinois factory will focus on lithium-ion battery cells, packs, and energy storage system integration. Upon full production, it will have an annual pack production capacity of 10GWh and an annual cell production capacity of 40GWh.<\/p>\n
Besides direct investment in factory construction, Chinese power battery companies can also establish production lines overseas and tap into local supply chains through ecosystem partnerships and acquisitions.<\/p>\n
On September 1st, Slovakian battery manufacturer InoBat announced on its official website that Gotion High-Tech and InoBat had signed an investment agreement in Hefei on August 23rd, with Gotion High-Tech acquiring a 25% stake in InoBat.<\/p>\n
Following closely, EVE Energy US Holding LLC, a wholly-owned subsidiary of EVE Lithium Energy, announced on September 5th that it had signed an agreement with Electrified Power, Daimler Truck, and PACCAR to jointly establish a joint venture in the United States, which will invest in battery production capacity. It is understood that the batteries produced by the joint venture will be primarily used in designated North American commercial vehicle applications.<\/p>\n
An inevitable path to overseas expansion<\/p>\n
Why have domestic battery manufacturers flocked to overseas capacity building in recent years?<\/p>\n
Changan Automobile Chairman and Party Secretary Zhu Huarong has publicly stated that the new energy vehicle industry has transitioned from a past era of “scarcity, shortage, and high cost of electricity” to today’s battery overcapacity.<\/p>\n
According to data from the China Automotive Power Battery Industry Innovation Alliance, from January to June, my country’s cumulative installed capacity of power batteries reached 152.1GWh, a year-on-year increase of 38.1%. However, during the same period, my country’s cumulative power battery production reached 293.6GWh, a year-on-year increase of 36.8%. This means that in the first half of this year, power battery production was nearly double the installed capacity, far exceeding demand.<\/p>\n
CATL also announced that its capacity utilization rate fell 20% in the first half of the year, from 81.25% in the same period last year to 60.5%.<\/p>\n
This decline in capacity utilization has prompted the industry to consider how to manage this capacity, with overseas expansion becoming a key solution. Furthermore, in Europe, where battery manufacturers are concentrated, there remains a significant gap in demand for power batteries.<\/p>\n
South Korean battery market research firm SNE Research predicts that by 2023, Europe’s demand for electric vehicle batteries will reach 406GWh, with an expected supply of 335GWh, a shortfall of nearly a quarter.<\/p>\n
The EU has set a timetable for banning the sale of fuel-powered vehicles (FCVs) at 2035, while the UK and Norway have set targets of 2030 and 2025, respectively. While Europe has a relatively well-developed traditional automotive supply chain, its electric vehicle industry chain has not caught up quickly.<\/p>\n
In the 2022 global power battery installed capacity ranking, CATL ranked first, followed by LG Energy Solution, BYD, Panasonic, SK On, and Samsung SDI. None of the top ten companies are European.<\/p>\n
Europe’s domestic power battery industry faces numerous challenges in addressing its shortcomings. For example, Sweden’s highly sought-after Northvolt, founded in 2017, only achieved mass production in mid-2022.<\/p>\n
A March 2018 analysis by Transport & Environment Europe (T&E) indicated that over two-thirds (68%) of Europe’s lithium-ion battery production plans face the risk of delays, reductions, or cancellations.<\/p>\n
On the other hand, European and American policies such as the Inflation Reduction Act (IRA) and the EU Batteries and Waste Battery Regulation (EBRD) have negatively impacted Chinese power battery companies’ reliance solely on exporting their products.<\/p>\n
For example, the US Inflation Reduction Act (IRA) provides purchase subsidies for new energy vehicles that meet battery localization requirements and imposes an additional 7.5% tariff on lithium batteries imported from China.<\/p>\n
If Chinese power battery companies rely solely on exports rather than building factories overseas, they may face a series of business bottlenecks, such as the dual pressures of transportation capacity and costs.<\/p>\n
With the US implementing its policies, Europe is not far behind.<\/p>\n
Julia Poliscanova, senior director of automotive and electric vehicles at T&E, stated that the Inflation Reduction Act has changed the rules of the game, and Europe needs to contribute more funds or risk losing planned battery factories and jobs to the United States.<\/p>\n
In August, the EU’s new battery directive came into effect. This means that the EU, from an ecological perspective, is erecting an increasingly high barrier to all power batteries entering the European market.<\/p>\n
The EU’s new battery directive’s three mandatory requirements: battery passports, battery recycling, and carbon footprinting. These will inevitably lead to higher costs in the short term. Furthermore, the EU’s carbon emissions classification and thresholds may impact the competitiveness of Chinese power battery companies.<\/p>\n
On September 14, The Guardian reported that, in order to reduce external dependence, the European Parliament voted 515 in favor to 34 against a proposal to diversify the supply of key raw materials such as lithium and silicon. The proposal aims to ensure that by 2030, no more than 65% of the supply of any strategic raw material will be imported from a single country.<\/p>\n
Although the bill itself only mentions “a single country” and doesn’t specifically mention China, media outlets like The Guardian believe that China is the primary target of this policy.<\/p>\n
For power battery companies, building factories and establishing land overseas, such as in Europe, while regulations remain in place, offers a way to preemptively adapt to the EU’s regulatory barriers.<\/p>\n
Faraday Energy Chairman Wang Yu has previously stated that localized supply in North America and Europe is on the agenda, with local battery production required starting in 2026. This is crucial for Chinese manufacturers to achieve market and production capacity internationalization.<\/p>\n
According to data released by South Korean market research firm SNE Research, the share of power battery installations held by Chinese companies in Europe has continued to increase over the past four years, reaching 11.8%, 16.8%, 22.6%, and 34% from 2019 to 2022, respectively.<\/p>\n
What hurdles are there to overcome when going global?<\/p>\n
However, it’s important to note that Chinese power battery companies face further challenges in the process of globalization.<\/p>\n
On the one hand, Europe, with its weak battery industry foundation, lacks the necessary talent and supply chain infrastructure. The European Commission estimates that by 2025, the battery industry will need 800,000 engineers trained and retrained. Currently, Chinese companies operating in Europe require constant communication with their home country across time zones, making efficiency a major issue.<\/p>\n
On the other hand, newly arrived Chinese companies face uncertainties regarding local regulations and even politics.<\/p>\n
On August 26, Hungarian opposition figure and former MEP J\u00e1vor Benedek claimed on social media that the European Commission would investigate the water use of CATL’s Hungarian factory. The MEP complained to the European Commission that CATL’s building permit may violate the EU Water Framework Directive and the EU Habitats Directive.<\/p>\n
The reason for this is that the city’s groundwater is already overexploited, and CATL’s local project “may” exacerbate water shortages.<\/p>\n
Beyond policy and regulatory issues, Europe also faces challenges with anode production.<\/p>\n
In the lithium battery materials sector, Europe boasts large cathode material companies such as Glencore, Eurasian Resources, Umicore, and BASF, which can meet the raw material procurement needs of battery companies building factories in Europe and abroad.<\/p>\n
However, Europe is relatively short of anode, separator, electrolyte, and other materials, hindering the development of large-scale battery projects and hindering further cost reductions and ensuring a stable raw material supply.<\/p>\n
Yang Hongxin, Chairman and CEO of Honeycomb Energy, believes that “Currently, the most challenging part of establishing production capacity in Europe is actually the anode. Chinese lithium battery companies setting up factories in Europe already have factories for cathodes, electrolytes, battery casings, and separators. Local European companies like BASF also have cathode material plants. However, anode materials present challenges due to their high power consumption and environmental issues related to dust.”<\/p>\n
Data shows that global anode material production will reach 1.468 million tons in 2022, a year-on-year increase of 67.3%. China’s global market share of anode material production will further increase, rising from 92% in 2021 to 96%. Overseas anode production will reach 53,000 tons, with most concentrated in Japan and South Korea.<\/p>\n
For Chinese power battery companies expanding overseas, Miao Wei, member of the Standing Committee of the National Committee of the Chinese People’s Political Consultative Conference and Deputy Director of the Economic Committee, proposed four suggestions at the 2023 World Power Battery Conference: reducing costs and increasing efficiency, preparing for next-generation battery technologies, strengthening the supply and price stability of upstream battery materials, and promoting the green and low-carbon development of power batteries.<\/p>\n
At the same time, he also stated that Europe and the United States are accelerating the development of local power battery companies, and protectionism is also on the rise. Domestic power battery companies should prioritize brand marketing when expanding internationally and avoid competitive pricing and homogenization.<\/p>\n
With the rapid expansion of the global new energy vehicle market, the battle for market share among Chinese power battery manufacturers is shifting from internal competition to external competition. Zhao Weijun, Executive Director and President of Envision Power China, has stated that the local nature of automotive supply dictates that companies that are the first to establish factories overseas and meet the needs of automakers will gain a first-mover advantage.<\/p>\n
However, behind the seemingly limitless prospects, “going global” still requires navigating numerous hurdles.<\/p>\n","protected":false},"excerpt":{"rendered":"
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