Most automobile manufacturers worldwide have committed to producing only electric vehicles starting from 2030. To achieve this goal, automotive brands are partnering with various battery companies to drive the construction of large-scale battery factories. However, there are concerns that the current pace of battery production may lead to oversupply.
LG Energy Solution, SK Innovation, Samsung SDI, and companies like GM, Ford, and Stellantis are collaborating to build large-scale battery factories in North America. The planned production capacities are as follows: LG NSOL 255 GWh, SK Innovation 185 GWh, and Samsung SDI 23 GWh. If the production facilities are completed as scheduled, they will establish the foundation for manufacturing 7 million electric vehicles annually starting from 2025. This is nearly half of the annual new car sales in the United States, which is approximately 14 million vehicles.
However, some observations suggest that the demand for electric vehicles may not exceed 7 million units per year. EV Adoption, an automotive market research firm, estimates that the U.S. electric vehicle market will reach around 2.05 million vehicles by 2025. The International Energy Agency (IEA) projects electric vehicle sales of 3.5 million vehicles in the United States by 2025, only half of the 7 million figure. In 2022, 850,000 electric vehicles were sold in the United States, indicating the potential issue of battery oversupply.
Currently, in the United States, various manufacturers are promoting the construction of battery factories locally to take advantage of the tax benefits under the Investment Tax Credit. Companies such as Ford, Volkswagen, Toyota, BMW, and CATL are establishing battery factories in the United States. Additionally, Tesla has announced plans to establish a battery factory with an annual capacity of 2 million units at its Nevada-based GigaFactory. The supply is expanding disproportionately compared to the demand.
The situation in Europe is even more severe. Since 2018, three South Korean battery companies have entered the European market, starting production in Poland and Hungary. Later, Chinese companies and local startups also entered the European market. From 2024, the supply is expected to exceed demand by around 30%, resulting in oversupply.
China is also facing oversupply issues. Shangtai Technology, the sixth-largest cathode material supplier in China, has announced the suspension of production at its facility in Shijiazhuang, Hebei Province, starting from March this year. The resumption of production will depend on future market conditions, effectively resulting in an indefinite suspension.
Regarding the suspension of production at the Shijiazhuang facility, the company stated, "Since the beginning of this year, the growth rate of electric vehicles has slowed down, and battery pack production has become negative, presenting overall weakness in the demand for cathode materials." "In contrast, the supply underwent a substantial increase in production capacity a few years ago, coupled with a significant increase in yield, resulting in a reversal of supply and demand for cathode materials and an overproduction situation."
According to the South China Morning Post, China's electric vehicle battery production capacity is expected to increase from 500 GWh this year to 3,000 GWh by 2025, a six-fold increase. However, the projected domestic demand for batteries in China by 2025 is 1,000 GWh. In other words, the battery production would be more than three times the demand. Currently, there are over 125 battery factories operating nationwide in China, which is over ten times the combined number of battery factories in Europe and North America.
As concerns about oversupply grow, raw material prices are starting to decline. The price of lithium carbonate, a key mineral for batteries, reached a record high of 457,692 CNY per ton on the Shanghai Nonferrous Metals Market but fell by 61.6% within a year due to slowing demand for electric vehicles. Nickel prices on the London Metal Exchange dropped by 18.5% to $24,447 during the same period.
The battery industry currently faces challenges such as low capacity utilization, insufficient high-end capacity, and surplus low-end capacity, which hinder the healthy development of the industry. This situation also leads to waste and environmental pollution. Therefore, promoting the healthy development of the battery industry will be a major issue for China's new energy vehicle industry in the future.
