China's lithium battery industry under the international competition pattern

The global battery industry is undergoing a profound reconstruction. Although China currently occupies a dominant position, it faces increasingly fierce international competition. As countries around the world regard the lithium battery industry chain as a strategic asset and take various measures to develop local production capacity, the global market space and technological advantages of Chinese companies are facing all-round challenges. This competition is not only reflected in the terminal product market, but also runs through multiple dimensions such as resource control, technical standards and industrial policies.
 

Leading and hidden worries in market share
Leading and hidden worries in market share constitute a portrayal of the current situation of China's lithium battery industry. Data from 2024 show that the global market share of China's six leading battery companies totaled 68.1%, far exceeding the 16.9% of the three Korean companies. CATL ranks first in the world with a share of 38.9%, followed by BYD with 16.9%. This market advantage stems from China's systematic advantages in material research and development, production capacity scale and supply chain integration. However, if we look closely at the installed capacity in overseas markets (excluding China), only four Chinese companies entered the top ten from January to July 2023, with a combined market share of only 31.6%, reflecting the shortcomings of Chinese battery companies in internationalization. What is more serious is that European and American countries, which have almost dominated traditional energy for an era, are not willing to be surpassed by China and are weakening the competitive advantages of Chinese companies through trade protection policies.
 

European and American policy blockade
European and American policy blockade constitutes the main obstacle to the internationalization of China's lithium battery industry. The 2022 U.S. Inflation Reduction Act (IRA) clearly stipulates that electric vehicles must meet conditions such as "key minerals with a certain value share in the battery must come from the United States or a country with a U.S. free trade agreement" to be eligible for tax credits. The bill also clearly states that batteries produced by Chinese special entity enterprises will not be eligible for tax rebates after 20246. Europe has also set local production capacity targets for strategic raw materials such as lithium, nickel, cobalt, graphite, and manganese, and set localization requirements in subsidies, trade and other links. These policies are essentially to artificially change the market competition environment through administrative means and force Chinese companies to deploy overseas production capacity. As Wang Yu, chairman of Farasis Energy, predicted: "2026 will be the watershed, and then North America and Europe's requirements for localized battery production will enter the practical agenda."

Overseas capacity layout
Faced with this policy environment, Chinese battery companies are accelerating their overseas capacity layout to circumvent trade barriers. According to incomplete statistics, as of 2023, 10 power battery giants including CATL, Envision Power, Guoxuan High-tech, Sinovation, Honeycomb Energy, Farasis Energy, EVE Energy, and Xinwanda have planned or have established industrial layouts overseas, with 33 publicly disclosed projects and a total investment budget of more than 400 billion yuan. Among them, at least 10 projects have an investment budget of more than 10 billion yuan, and 15 projects have disclosed power battery capacity plans of more than 440GWh. In addition, from the beginning of 2023 to July, 16 Chinese lithium battery material companies announced 20 overseas expansion projects, with a total investment amount of more than 95.7 billion yuan. Although this large-scale overseas expansion is necessary, it also faces many challenges, including higher production costs, labor costs, and insufficient supporting industrial chains. Take CATL's German factory as an example. It took four years from the start of construction in 2019 to the announcement of production in early 2023.

Technology route competition
Technology route competition is another important dimension of international competition. China currently has a clear advantage in the lithium iron phosphate (LFP) technology route. In 2024, LFP batteries accounted for 74.6% of domestic vehicle installations. However, European and American companies are focusing on the research and development of next-generation battery technology, trying to overtake on the curve. Solid-state batteries are seen as a key area of ​​future competition. Although Chinese companies have also made some arrangements, traditional car companies such as Toyota of Japan and Volkswagen of Germany have also invested heavily in this field. Ouyang Minggao, an academician of the Chinese Academy of Sciences, pointed out: "Chinese companies must develop their own technology routes and adhere to independent innovation. The development of solid-state batteries should be gradual, such as the gradual transition of the negative electrode from silicon carbon to lithium metal, and then seek performance improvement on the premise of ensuring safety and reliability." In addition, in emerging fields such as battery recycling and sodium-ion batteries, international competition is also becoming increasingly fierce.
 

Resource competition
The resource competition is escalating globally. Western countries are aware of the importance of critical mineral resources and are trying to reduce their dependence on China's supply chain. US President Biden and European Commission President von der Leyen issued a joint statement saying that the two sides "intend to immediately negotiate a targeted critical mineral agreement" to "reduce unnecessary strategic dependence in these supply chains." Resource-rich countries such as Australia and Canada have also stepped up their scrutiny of Chinese investment. At the same time, Chinese companies are facing more and more challenges in their resource layout in Africa, South America and other places, including political risks and community boycotts. Although China controls nearly one-third of the world's lithium production capacity through active investment, this expansion has also aroused the vigilance and countermeasures of Western countries.
 

Overcapacity crisis
The overcapacity crisis may intensify international competition. At present, China's power battery industry has shown obvious structural overcapacity. The 2025 capacity planning of only 20 companies has reached 6188GWh, and the most optimistic market demand forecast is only 2010GWh. Xu Jinfu, chairman of Tianci Materials, revealed that there are now 89,000 companies in the lithium battery track, and 58,000 new companies have been registered in the past year and a half from 2022 to now. This crazy expansion has led to a sharp decline in the industry's profit margins, with prices of some products falling by more than 60%. Zhu Ronghua, chairman of Changan Automobile, publicly stated that "the new energy vehicle industry has long bid farewell to the past situation of 'low electricity, electricity shortage, and expensive electricity'. The domestic battery industry has experienced overcapacity, and the phenomenon of overcapacity is still very serious." In this context, Chinese companies may expand their international markets through low-price strategies, thereby triggering more trade frictions.
 

Adjust development strategy
Facing a complex international competitive environment, China's lithium battery industry urgently needs to adjust its development strategy. On the one hand, it needs to strengthen independent innovation, especially in cutting-edge fields such as solid-state batteries and sodium-ion batteries; on the other hand, it needs to optimize the global layout and avoid trade barriers through localized production. Chen Xiang, vice president of Yiwei Lithium Energy, pointed out: "The entire energy storage industry is not about to be reshuffled, but is in the process of reshuffle. The pursuit of low prices in the industry will gradually shift from one-time purchases to full life cycle considerations." This means that Chinese companies must shift from price competition to value competition, and from capacity expansion to technology leadership, in order to maintain their leading position in the increasingly fierce international competition.