Overcapacity in China’s battery cell industry will lead to consolidation

Capacity overshooting demand

China’s booming lithium-ion battery cell industry is overshooting demand, which will lead to industry consolidation. Primary research from CRU’s battery team in recent site visits illustrates the context and scale of the issue.

Gigafactory average utilisation rates were 45% in 2022 and have dropped further in the first half of 2023. Such numbers would have serious implications for any battery gigafactory outside of China where generally 75-85% utilisation is considered to be the point of profit.

Despite the low utilisation rates, China’s gigafactory capacity pipeline has swollen to an ambitious 4,200 GWh by 2030 and new announcements continue to be made on a weekly basis. To put this in context, this is twice the GWh required if the entire China vehicle fleet were to be converted to battery-electric vehicles.

A dramatic influx of investment by both new and incumbent manufacturers has led to an increasingly crowded battery market in China. However, the Chinese market can be characterised as a near-oligopoly, where CATL and BYD hold a colossal 73% market share.

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