China's Leading Lithium-ion Battery Market Accounts For 73% Of Global Production Capacity

- Oct 24, 2019-

The electrification of the entire world is getting higher and higher. Not only is the global electricity supply increasing, but the electrification of existing transportation infrastructure is rapidly evolving. By 2040, more than half of the cars on the road are expected to be powered by electricity.

Batteries play a key role in this transition, but a relatively new battery seems to be dominant in personal electronics, transportation and heavy industry applications.

In fact, lithium batteries are steadily occupying a dominant position.

Brief history of batteries

For a long time, batteries have always been an important part of our daily lives. In 1800, the Italian physicist Alessandro Volta invented the world's first real battery. This invention is a significant breakthrough in the field of batteries, and since then battery technology has only a few major innovations.

The first major innovation was the lead-acid battery that was invented in 1859. This is the world's first rechargeable battery and is by far the most commonly used internal combustion engine starter battery.

In the past two centuries, there have been more or less innovative battery designs, but it was not until 1980 that a true game rule changer was invented. The breakthroughs at Oxford University and Stanford University led to the advent of lithium-ion batteries. In 1991, Sony commercialized the first lithium-ion battery.

What is special about lithium?

In lithium ion batteries, lithium metal migrates from one electrode to the other in the form of lithium ions. Lithium is one of the lightest elements and it has the strongest electrochemical potential. This allows the lithium battery to store a lot of energy in a small, light battery. Therefore, lithium-ion batteries have become the battery of choice for many consumer electronics products such as notebook computers and mobile phones.

Advantages of lithium-ion batteries

Due to the inherent advantages of lithium-ion batteries, sales have grown exponentially since the end of the last century. This also contributes to the continued reduction in the cost of lithium-ion batteries. The cost reduction has further helped lithium-ion batteries gain a foothold in new applications.

According to research firm Bloomberg NEF, lithium-ion battery prices fell by 85% between 2010 and 2018, reaching an average of $176 per kWh. According to relevant data, this price will drop to $94/kWh by 2024 and will fall to $62/kWh by 2030.

Cost reductions are important for companies that use batteries in their services, or for power producers that need to store energy. So far, most lithium-ion batteries are sold in the consumer electronics arena, but electric vehicles will drive future lithium-ion battery sales.

Most cars on the road today still use lead-acid batteries and internal combustion engines. But in the past five years, sales of electric vehicles driven by lithium-ion batteries have increased more than 10 times. In addition, more and more countries are setting a ban on the sale of fuel vehicles in the future, and it is expected that electric vehicles will eventually dominate personal transportation.

Of course, this means that the demand for batteries in the future will be much greater. Electric car manufacturer Tesla is working with Matsushita to invest billions of dollars to build a new lithium-ion battery factory. But in this situation, although many of the key research and development work for manufacturing lithium ions is carried out in the United States, the market share of lithium-ion battery manufacturers in the United States is falling behind.

The relevant growth market for lithium-ion batteries is in heavy industrial applications such as crane trucks, sweepers and scrubbers, airport ground support applications and autopilot vehicles. Historically, these niche applications have used lead-acid batteries and internal combustion engines. But rising economic benefits have quickly turned these areas into lithium-ion batteries.

China has seized the momentum of this transformation and has established an absolute leading position in the market.

China's market dominance

According to an analysis by Bloomberg NEF, the global lithium battery capacity in early 2019 was 31.6 billion GWh (GWh). 73% of the production capacity comes from China, followed by the United States with 12% of global production capacity far behind.

By 2025, global lithium battery capacity is expected to grow strongly to 1211 GWh. US capacity is expected to grow, but growth will be lower than global capacity. Therefore, the US share of the global lithium battery manufacturing market is expected to shrink further.

Tesla is trying to solve this problem by building its own battery factory, but for companies such as California OneCharge that supply all types of batteries, it is too challenging to find suppliers locally. OneCharge CEO Alex Pisarev emphasized the company's challenge: “American manufacturers are happy to use locally produced lithium-ion batteries. But this is unrealistic today. So we Must continue to import from China."

This is in line with the current market situation of solar panel panels. Although the solar panel was invented by American engineer Russell Ohl, China now dominates the global solar panel market. Now, China is committed to leading the production of lithium-ion batteries in the world.

The current low solar panel helps drive the explosive growth of the photovoltaic industry, which in turn supports many jobs in the United States. But most of these battery panels are made in China.

China has a major advantage in the labor force, which allows it to dominate many manufacturing industries. In addition, China's lithium reserves and production far exceed the United States. In 2018, China's lithium production was 8,000 tons, ranking third in all countries and nearly 10 times that of the United States. In 2018, China's lithium reserves are 1 million tons, almost 30 times that of the United States.

Future trends indicate that lithium-ion batteries will replace more lead-acid batteries in the transportation and heavy equipment sectors. The transition to lithium batteries has brought many new challenges and opportunities, and China is holding another clean energy manufacturing opportunity in its hands.