The intensifying competition among global power battery giants

By Jeff Lee 2023-05-11

The dominant technology for power batteries today is lithium-ion batteries. Both LFP and NCM have their advantages and are competing with each other. Although obtaining the raw materials for manufacturing batteries is not easy, with the increasing maturity of battery factory technology, the acceleration of EV development, and the intensification of commercial competition, the R&D funds for batteries will inevitably decrease in unit price after mass production. Similar to the price war in the early days of the EV market, the price war for batteries will also be one of the focuses of the global automotive industry in the next few years.

In the past two years, global sales of new energy vehicles have exploded, leading to a significant increase in battery capacity installed. In 2021, it reached 300 GWh, while it grew to 518 GWh last year, with a growth rate of over 70%. The top three battery manufacturers are Ningde Times, BYD, and LG (the latter two with similar performance). However, only BYD is also an EV manufacturer. As a result, with the unstoppable momentum of its self-owned EV brand sales rising to the top of the global new energy vehicle throne last year, its battery capacity installed also increased by more than 1.5 times, from fourth place the previous year to second place. Of course, the dominant battery manufacturer CATL still has a stunning annual growth rate of 90%, leading other battery manufacturers with a market share of 37% (BYD and LG both have 13.6%). However, the batteries used by the world's second-largest NEV brand, Tesla, have always been supplied by CATL, LG, and Panasonic. The status quo will soon change, as Tesla’s Gigafactory Berlin will switch to BYD batteries. Does Tesla, who claims to be an energy supplier, want to hand over EV’s most expensive component to its strongest competitor?

Conversely, does BYD want to hand its best battery product to Tesla for its higher sales volume?

Simply put, the brand positioning of BYD and Tesla is not in the same league at this stage. Moreover, Tesla does not see itself as a general automaker. In addition to the Chinese auto market where it competes with BYD, Tesla’s target market in Europe and the United States is not currently BYD's main battlefield. Therefore, BYD supplying batteries to Tesla's Berlin factory is merely a mutually beneficial exchange. This way, BYD's battery market share is expected to continue to rise. However, the battle for battery sales will continue to be closely contested for several years and is full of variables.

  • Traditional automakers in Germany, the United States, Japan, etc., are expected to complete the development of their new EV platforms by 2025 or later and launch them across their entire product lines. The United States, where the IRA is in effect, is a particularly crucial battleground. Due to the IRA weakening the competitiveness of imported batteries, various collaborations between American automakers such as GM and LG, the establishment of battery factories by Ford and CATL, and VW's investment in QuantumScape to build battery factories in the United States all indicate that the battle for positioning in the US manufacturing industry among various battery manufacturers has already begun. When the US EV market booms in a few years, it will undoubtedly bring tremendous growth momentum to these battery factories.
  • Ranked fourth, Panasonic has shown slow growth in recent years and hasn’t won large orders in the two years of high growth in new energy vehicles, mainly due to the slow pace of electrification of Japanese automakers. However, when the big Japanese carmakers, who dominate the global automotive industry, start targeting electrification, I believe Panasonic's battery market share will show astonishing growth. I expect this scenario to become a reality in three years.
  • Solid-state battery technology is expected to mature and become commercially available around 2027. In the meantime, the price war for lithium-ion will intensify. If battery manufacturers lack the stability and cost competitiveness of raw materials or upstream supply chains, they will lose the favor of automakers, and a round of elimination with the strong players emerging as winners is inevitable.
  • The specifications of lithium-ion batteries will become increasingly standardized, and car manufacturers will shift their focus on the competition for NEV sales to "intellectualization.” Therefore, battery manufacturers can no longer satisfy the market by solely producing battery packs; they must also consider the customization needs of car manufacturers, integrate with the overall design of the vehicle, and improve the energy density of the battery pack to win more business opportunities.
  • Battery manufacturers that can provide technology for recycling and reusing power batteries will greatly benefit their market competitiveness. Although it is the responsibility of car manufacturers to find suitable recycling and processing units for batteries after selling to consumers, car manufacturers’ R&D resources should focus on vehicle development, and recycling and reuse technology should be led by battery manufacturers to maximize their benefits. This can even result in mutual benefits between battery and car manufacturers and contribute to future efforts to reduce battery costs.

This year, the global installed capacity of power batteries is estimated to reach 670 GWh, and by 2025, it will increase significantly to 1,550 GWh. In 2030, it is estimated to reach 3,000 GWh. These estimates indicate that 2024 to 2027 will be a period of high growth for the battery industry, and the growth rate will gradually slow down afterward. The fierce competition among battery manufacturers will only get more intense from then on.