China’s Lithium Battery Production Capacity versus Demand

The table below (table 1) shows the approximate 2018-2020 gigawatt per hour (GWh) production capacities for most, if not all, of the primary lithium battery factories (for electric vehicles) in China.  This data is based on an intensive Internet search for company news releases and other information with such data.  The table also shows the expected 2025 expected production capacities for the same factories, and, again, with data based on news releases and other sources.

table 1            city	province	company	2018 - 2020 capacity (GWh)	expected capacity by 2025 (GWh)
beijing (shunyi)	admistrative district	funeng technology (usa)	0	8
changshu	jiangsu	sk innovation (korea)	0	7.5
changshu	jiangsu	suzhou youlion	1.5	2.5
chongqing	admistrative district	byd	0	20
dalian	liaodong	panasonic (japan)	10	22
ganzhou	jiangxi	funeng technology (usa)	10	25
guangzhou	guangdong	guangzhou great energy & technology	0	15
hangzhou	zhejiang	wanxiang group	0	80
hefei	anhui	guoxuan high tech co	4	22
huizhou	guangdong	byd	2	4
huizhou	guangdong	eve energy	7.5	20
jiashan	zheijiang	lithium werks (dutch)	0	8
jingzhou	hubei	geely	0	6
liyang	jiangsu	boston power (usa)	8	8
liyang	jiangsu	contemporary amperex technology ltd (catl)	18	36
luoyang	hainan	china aviation lithium battery (calb)	3	10
nanjing	jiangsu	lg chem (korea)	8	32
nanjing	jiangsu	lg chem (korea)	20	60
ningde	fujian	contemporary amperex technology ltd (catl)	12	50
qingdao	shangdong	guoxuan high tech co.	1	2
shanghai	admistrative district	tesla (usa)	0	30
shenzhen	guangdong	bak power battery	10	25
shenzhen	guangdong	byd	14	15
shenzhen	guangdong	optimum nano	0	10
tianjin	admistrative district	tianjin lishen battery co.	10	20
wuxi	jiangsu	automotive energy supply corp. (aesc) (japanese - chinese)	0	20
xian	shaanxi	byd	0	30
xian	shaanxi	samsung sdi (korea)	2.5	30
xiangyang	hubei	dynavolt	6	12
xining	qinghai	byd	12	24
xining	qinghai	contemporary amperex technology ltd (catl)	2.3	2.3
zhangzhou (zhaoan)	fujian	dynavolt	6	12
zhejiang	anhui	tianneng group	2.5	5.5
zhenjiang	jiangsu	farasis energy (usa)	0	20
		total 2018-2020 GWh production capacity for EV lithium batteries	170.3	693.8

The Chinese Government has indicated that a targeted production in China for 2020 is 2 million electric vehicles (EVs).  Based on affordability and sources, most EVs sold in China currently are what can be called “low-end” EVs, meaning smaller lithium batteries ((assume an average size of 25 kilowatt hours (kWh) for this size vehicle)).   A much smaller percentage (5%) is “mid-range” (average battery size – 60 kWh) and “high-end” (average battery - 100 kWh), also about 5% of the market.  Table 2 below shows the expected total GWhs needed to produce these batteries (2 million for the EVs produced; 90% of them low-end; 5% mid-range; and 5% high-end).

table 2	number of batteries needed (% times 2 million)	required kWh per battery (average)	total kWh for size of battery (column B X column C)	kWh converted to GWh (column D divided by 1,000,000)
low-end batteries needed in 2020 (90% of 2 million)	1800000	25	45000000	45
mid-range batteries needed in 2020 (5% of 2 million)	100000	60	6000000	6
high-end batteries needed in 2020 (5% of 2 million)	100000	100	10000000	10
			total GWhs of batteries for 2 million EVs	61

So, the expected total 2018-2020 GWh capacity (170.3 GWh), shown in table 1 above, exceeds the expected GWh demand (table 2 – 61 GWh), by 2.8 times (170.6/61).   This is based on assumptions on vehicle battery sizes used and the total EV sales.  Even if the mid-range and high-end sized EVs are greater in demand then the low-end, e.g., 26% for mid and 26% for high, the 2020 GWh capacity exceeds the GWh needed by about 63 GWh (170.3 GWH – 107.2 GWh).

Internet sources suggest that the Chinse Government’s target for EV production in 2025 is 7 million.  As you can see in table 1 above, expected Chinese factory GWh production capacity in 2025 is about 694 GWh.  And table 3 below, using the same expected low-end, mid-range, and high-end vehicle production percentages as in table 2, shows the expected demand to be about 213 GWh.  Then Chinese factories’ 2025 expected EV lithium battery production capacity exceeds the EV demand (7 million batteries) by about 481 GWh (693.8 GWh – 213.5 GWh) and by an even greater amount than in 2020 (3.3 versus 2.8).

table 3	number of batteries needed (% times 7 million)	required kWh per battery	total kWh for size of battery (column B X Column C)	kWh converted to GWh (column D divided by 1,000,000)
low-end batteries needed in 2020 (90% of 7 million)	6300000	25	157500000	157.5
mid-range batteries needed in 2020 (5% of 7million)	350000	60	21000000	21
high-end batteries needed in 2020 (5% of 7 million)	350000	100	35000000	35
			total GWhs of batteries for 7 million EVs	213.5

Even if you assume mid-range and high-end EVs have most of the market in 2025 (e.g., 26% for mid and 26% for high versus 48% for low-end), battery production capacity greatly exceeds demand (694 GWh versus 277 GWh).

Even if given the possibility that battery production capacity data, expected EV vehicle production numbers, the percentages of low-end, mid-range, and high-end vehicles purchased, and the average sizes of their batteries are assumptions somewhat off from what is assumed above, it seems likely that Chinese factories will greatly exceed in capacity the ability to meet the Chinese domestic demand of EV lithium batteries.

Some conclusions on what appears to be an excessive Chinese lithium battery production capacity (for EVs) versus a demand for those batteries are:

1.      Profit pressure will be placed on many of the battery-producing companies with some of the companies failing;

2.      More international automobile companies may set up EV production in China to take advantage of the excessive battery supply;

3.      A lot of value may go to waste (setting up lithium battery production lines require millions of dollars) as production capacity so greatly exceeds demand and goes unused; and

4.      Chinese government market intervention through subsidies and targeted production plans interferes with more sound supply-demand analysis (for capital expenditure decisions) that takes place in a market system like the one in the United States.