We are facing a huge oversupply of batteries. New factories are growing like mushrooms after rain

Luc Williams

The demand for lithium-ion cells is growing rapidlyas automakers electrify their fleets and utilities electrify their fleets they build energy storage facilities to stabilize the power grid. However, according to BNEF, manufacturers plan to open so many new factories that their production capacity will exceed cell demand for the rest of the decade.

By the end of 2025, the global battery industry will be able to produce more than five times as many cells as the world will need, predicts BNEF in its latest forecast for electric vehicles.

BNEF estimates that this is good news for car manufacturers and buyers of electric vehicles, because batteries will be cheaper, but it is not the best news for cell manufacturers, especially for new entities entering the battery market.

Gigantic oversupply of batteries

The oversupply of cells is most severe in China. In the Middle Kingdom, production capacity for the rest of the decade will exceed annual demand for batteries by at least 400 percent.

The world is flooded with lithium-ion batteries. Prospects for overcapacity in cell production / Bloomberg

Problem oversupply of batteries also applies to the United States. President Joe Biden has made building a domestic battery supply chain one of his top climate and industrial priorities. Amid efforts to strengthen the battery industry, the Biden administration last year offered Ford Motor a $9.2 billion conditional loan to build three battery plants.

Europe is also flooded with lithium-ion batteries, and yet governments insist on increasing production capacity even further. Swedish battery maker Northvolt has a factory under construction in Germany, but German Economy Minister Robert Habeck is already lobbying for the company to build another one.

Batteries will be cheaper, the chemical composition of cells is changing

Due to excess capacity in the industry, the launch of some planned factories around the world may be delayed or canceled, according to Yayoi Sekine, head of energy storage research at BNEF.

Simultaneously the chemical composition used to produce batteries changes. The report shows that lithium iron phosphate batteries are gaining popularity in powering electric cars, especially among Chinese car manufacturers. The component materials of these cells are cheaper than standard lithium-ion cells using nickel, manganese and cobalt. A switch to lithium iron phosphate cells could significantly reduce future demand for these metals used in lithium-ion batteries.


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