Like Solar Panels, China set to become Dominant Manufacturer of Batteries

The Chinese government has been exceptional in establishing its dominance on rapid growth in new industries. Its private sector has also responded well, leveraging the strengths of the Chinese state to rapidly increase scale, improve technology and capture global markets. The solar market globally has become the playground of Chinese companies with hardly one or two non-Chinese companies having the technology or the financial strength to compete.

Battery manufacturing for EVs is again set to be a huge market in the coming years. While the Japanese and Korean companies have a head start in the business with the likes of Panasonic, Samsung, LG being no pushovers, it is to be remembered that the Japanese companies used to own more than 50% of the market before the advent of the Chinese giants in these sectors. With a huge market of its own and massive government support in terms of cheap land, loans, and other incentives, it is only a matter of time before the Chinese companies outdistance the Japanese and the Koreans.

China already has 60% of the global battery manufacturing capacity which it plans to further increase by 250% over the coming 8-10 years. Huge giga-factories are being built helped by the generous flow of cash from Chinese banks. As different provinces compete to help companies set up new gen new age factories, more than 90 companies have entered the business.

Also, read How China Became The King Of Electric Vehicles

This is the same playbook that was followed by the Chinese government in the wind turbine and the solar business. While this resulted in carnage and bankruptcies of a large number of private companies, the survivors emerged as global giants with huge advantages in scale and technology.  CATL and BYD are already giants in the battery manufacturing business and as the industry evolves expect more large players from China to emerge.

China also has a huge market to cater, which it through implicit and explicit measures, reserves for its own companies ensuring continuous large scale demand. This huge source of demand cannot be tapped by outside companies unless they have some unique technology. The Chinese government has also ensured a new competitive barrier by buying the raw material supply chain of cobalt, lithium and other critical raw materials that go into the making of the batteries