China’s lithium-ion battery industry faces excess inventory, production capacity as EV market downshifts: industry analysts
- The battery industry is in the middle or late stage of a market clearing, and is only expected to break even and turn profitable next year, Sealand Securities forecasts
- No long-term growth story for lithium as excess supply set to balloon from 5 kilotonnes in 2023 to 118 in 2025: Daiwa
China’s electric vehicle (EV) battery market is expected to see continuous destocking of inventory this year as demand for EVs cools and companies along the lithium-ion battery supply chain suffer losses amid a price war stemming from excess capacity, analysts said.
Some small manufacturers could be squeezed out of the market to cut losses and the country’s top battery manufacturers and lithium mining companies will have to wait for 2025 to turn a profit, they estimated.
“The industry is still struggling with overcapacity, but the gap in profitability between the first-tier and second-tier manufacturers has already widened in the first half of 2023,” Li Hang, an analyst at Guangxi-based brokerage firm Sealand Securities, said in a report this month. “Companies in the second- and third-tier are already making losses.”
The industry is in the middle or late stage of a market clearing, and is expected to break even and turn profit-making next year, Li wrote, adding that investment in new capacity is expected to slow down this year.
China, which dominates the global EV battery supply chain from the processing of critical minerals to battery cell production, experienced plunging prices for lithium and battery cells in 2023 amid excess supply.
