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Future development of China's li-ion battery industry

2021/10/27 10:54:34

Summary: Given the trend that China's demand in power batteries will remain a rapid growth in five years to come, supply-side enterprises of power batteries in the country will thus focus on increasing their ability in technological innovation, value chain integration and business ecosystem empowerment.

Thanks to the global trend of energy saving and emission reduction and the rapid development of alternative energy vehicles, demand in li-ion batteries is soaring globally with the total demand projected to reach 1,223GWh in the year of 2025, which is mainly driven by the growing demand in power-type li-ion batteries. It should be noted that according to statistics, China's demand in power batteries topped the world in 2020. As China's consumption of alternative energy vehicles swells and overall ecological environment improves, China's terminal demand in power batteries will face an ongoing optimistic prospect in spite of the subsidy cut, reporting 40% compound annual growth rate (CAGR) in next five years.

To meet such fast growing demand and after taking policies and the trend of value chains into consideration, supply-side enterprises of power batteries in China will double efforts to develop their prowess in technological innovation, value chain integration and business ecosystem empowerment.

In terms of technological innovation, leading enterprises will dedicate themselves to the improvement of core technologies with an aim of seeking a breakthrough in their core competitiveness. Major technological innovation involves:

  • Technologies regarding the production of li-ion batteries, such as lithium extraction, lithium recycling and discovery of alternative raw materials, are the prioritized field that enterprises of all sorts in the industry, especially upstream ones, will concentrate on to develop.
  • Such advances in li-ion battery materials that solid, high-nickle materials will be the trend will not only enhance efficiency of materials but also cut costs in this aspect.
  • Ways of battery charging will be improved to be safer and more convenient so that customers can be freed of concerns about battery life.

  • In terms of value chain integration, enterprises that is positioned at the sub-link of the industrial chain tend to extend their businesses towards both upstream and downstream sectors for their value chains integration in order to ensure a sense of control over the industrial chain as a whole, stabilize supply systems, and win a greater say for themselves. For those listed enterprises whose businesses involve in several links of the industrial chain, they are progressing increasingly upon the sustainable developmental cycle of "R&D–value growth–financing–R&D" and making an active presence in the capital market. Based on the possibilities of value chain integration, three categories are concluded as follows:

  • The highest likeliness of value chain integration happens in li-ion battery plants and emerging auto manufacturers to move towards the upstream sector. Relying on the edge of core technologies, these plants speed up their business layouts through mergers and acquisitions from upstream enterprises on the industrial chain or their own expansion by overseas investment.
  • The likeliness that traditional auto manufacturers integrate their value chains in both upstream and downstream sectors follows second. With regards to the upstream sector, these auto manufacturers are reaching out for upstream resources so as to ensure a stable supply of raw materials. As for the downstream sector, they pay attention to innovative research about battery density for a longer battery life to meet terminal customers' need of charging of electric vehicles and driving safety.
  • Enterprises specialising in mineral or salt lake exploitation and lithium salt extraction are less likely to move downwards. Instead, they will probably take an approach of parallel value integration aiming to maintain their control of resources and boost their production capacity as well.

  • In terms of business ecosystem empowerment, a business ecosystem of li-ion battery industry comprising auto industry, internet companies, State Grid Corporation of China, charging equipment manufacturers and other enterprises that operate beyond traditional value chains takes shape to seize the very first opportunity of charging business. In pursuit of win-win results, such a business ecosystem is building a creative business mode that is centred around terminal customers and driven by data accumulation.

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