Staff members operate on a 10.5 GWh power battery production line at a local industry park in Ordos, North China's Inner Mongolia Autonomous Region on January 15, 2023. Photo:VCG

As the heart of electric vehicles (EVs), batteries account for the highest cost in a vehicle. Lithium batteries, after decades of rapid development, now flourish in Chinese market.

As owning an EV becoming a global trend, the market demand for lithium batteries has surged. According to one industry estimation, global demand for lithium batteries will exceed 1,700 gigawatt-hours (GWh) by 2025, doubling from 2022.

Such a hefty demand by the market calls for a significant capacity to fill. China-made batteries are of high quality with sufficient production capacity, so it is believed that Chinese battery companies will play a major role in this wave of global new energy revolution, analysts said.

China's battery materials and EV technology applications continue to make breakthroughs. The country now has formed the world's largest battery manufacturing value chain, extending from material research and development, battery production, recycling to equipment support, analysts said.

Complete system

At the same time, China has formed a relatively complete EV manufacturing supply chain, and about 70 percent of the global battery production capacity is located in China, said Zhang Yongwei, vice president of China EV100, a major think tank in the EV sector, said on Tuesday at the Conference on Innovated Global Supply Chain of NEV and ICV. 

According to the statistics by SNE Research, in 2022, seven of the world's top 10 electric battery makers were in China. As Chinese battery companies now explore the global market, the export volume of batteries continues to increase.

In the first three quarters, China's exports of auto-use electric batteries totaled 89.8 GWh, up 120.4 percent year-on-year, accounting for 88.7 percent of all battery exports, according to statistics from the China Automotive Power Battery Industry Innovation Alliance, released on October 11.

"The overseas market exploration by China battery companies is accelerating, and their investment in EV plants abroad is also conducive to further improving their global EV production capacity," Zhang Xiaorong, director of the Beijing-based Cutting-Edge Technology Research Institute, told the Global Times.

"Going global" is an inevitable trend for Chinese battery makers. Although Chinese companies now have the largest market share, the batteries are mostly produced in China, with their overseas expansion lagging far behind rivals such as LG, Samsung and other Japanese and Korean companies, Xie Zongbo, a media columnist, told the Global Times on Tuesday.

"The US is a hot destination for battery and EV investment. The supply chain of the traditional internal combustion engine auto-making there is relatively complete, which could bring new market space for Chinese companies," Xie said.

'Going global'

As one of the latest examples, Chinese battery manufacturer Gotion High-tech Co announced two investment plans of battery plants in two US states - Illinois and Michigan.

The planned $2-billion lithium battery manufacturing plant in Illinois is expected to produce 10 GWh of lithium battery packs and 40 GWh of lithium-ion battery cells annually.

Gotion said that it will invest $2.36 billion in the Michigan plant, with plans to complete plant construction by the end of 2031. The site will produce anode and cathode materials for the batteries.

On September 5, another Chinese lithium battery maker EVE Energy set up a joint venture in the US to produce batteries used in the designated North American commercial vehicle segment, according to the company's announcement on its website. Shareholders of the joint venture will be EVE Energy's wholly-owned subsidiary EVE Energy US Holding LLC (EVEUSA), Electrified Power, Daimler Trucks and Paccar Inc., which will invest in the construction of battery production capacity. 

Chinese battery manufacturers are not only expanding investments in the US, but in other markets too. 

For example, Gotion's factory in Gottingen, Germany, supported by Volkswagen, is expected to reach a production capacity of 5 GWh by mid-2024 and 20 GWh when fully complete.

In August 2022, China's battery giant CATL announced that it will invest 7.34 billion euros ($7.8 billion) to build a 100 GWh battery plant in Debrecen, Hungary, which is also the company's second battery plant in Europe.

However, analysts said that some risks remain for Chinese companies investing abroad.

In the context of the intensified technology containment by the US against China, Chinese enterprises may face potential risks in opening factories in the US, An Guangyong, an expert with the Professional Committee of Credit Management of the China Mergers and Acquisitions Association, told the Global Times on Monday.

In February, CATL and Ford reached a deal to invest $3.5 billion in an electric vehicle plant in Michigan, which was paused in September. US lawmakers have been probing Ford's battery plant plan over hypothetical concern it may facilitate the flow of US tax subsidies to China, and leave Ford dependent on Chinese technology, Reuters reported.

"Chinese companies may face more regulatory scrutiny and market access restrictions, which will add uncertainty to Chinese companies operating in the US. Meanwhile, policy uncertainty is to impact normal business operations," said An.

An said that local companies in America may have access to more support from the US government, while Chinese companies may face risks of unfair competition and other challenges.

Analysts said that Chinese companies "going global" should be treated fairly by foreign governments, as the plants invested by Chinese battery makers will assist local industrial chain, in addition to creating new jobs for locals.