China's fast-growing electric vehicle (EV) battery industry must look abroad for customers as their capacity after a period of aggressive expansion will soon be three times greater than demand from domestic electric-car makers.
Mainland manufacturers will produce an estimated 3,000 gigawatt-hours (GWh) of EV batteries in 2025, according to a report by the Economic Daily, a newspaper run by the State Council.
That is six times this year's expected output of 500 GWh, and three times the expected 2025 demand from domestic electric-car makers. The capacity estimate is based on expansion plans unveiled by the major battery producers, the Economic Daily said.
"The good news is that China's EV industry has overcome the bottleneck that once hindered its growth," said Phate Zhang, founder of Shanghai-based EV news site CnEVpost. "But the battery companies may need to look beyond the domestic market to get their demand digested now that China is already a leader in battery technology."
In 2022, mainland drivers will buy 6 million battery-powered vehicles, more than double last year's 2.99 million, according to a UBS forecast.
The passenger EV market will maintain steady annual growth of over 30% over the next few years, Fitch Ratings said on Thursday.
However, the rosy prospect does not bode well for all the battery suppliers in the world's largest EV market.
As of September, 48 EV battery suppliers were in operation, down from more than 200 in 2017, the Economic Daily said, citing data from the China Association of Automobile Manufacturers (CAAM).
The top 10 players controlled a combined 94.4% of the market on the mainland, the data showed.
After a decade of efforts to improve technology and manufacturing techniques, a clutch of Chinese EV battery makers have gained ascendancy in the global market.
Contemporary Amperex Technology Limited (CATL), based in Ningde in east China's Fujian province, is now the world's largest EV battery maker. It counts Tesla and BMW as customers and supplies one-third of the EV batteries worldwide.
BYD, an EV assembler and battery producer backed by Warren Buffett's Berkshire Hathaway, has about 13% share of the global market, according to Seoul-based SNE Research.
Chinese companies CALB, Gotian, Sunwoda and Svolt also make the list of the world's top 10 EV battery makers.
In September, CATL announced it would start building a US$7.35 billion plant in the Hungarian city of Debrecen within 2022, which will have an annual capacity of 100 gigawatt-hours (GWh) when complete in 2027.
The factory, its second outside mainland China, represents a major step for CATL in reinforcing its global strategy. It is expected to start production at its first overseas plant in Thuringia, Germany at the end of this year.
CALB will set up a production base in Portugal after signing an agreement with the Portuguese government earlier this month.
"Chinese EV battery companies will race ahead of mainland EV assemblers to become powerful international players," said David Zhang, a senior executive at Suzhou Hazardtex, a supplier of specialised vehicle batteries. "More importantly, they have to secure more orders from carmakers abroad now that the domestic demand will not be enough to support high usage of their facilities."
Chinese companies make two types of batteries that are widely used in electric cars: NCM batteries, composed of lithium, nickel, cobalt and manganese, and LFP batteries, which use lithium, iron and phosphate.