[Biz View] Rising China-Origin Battery Supply Shortage, Will It Slow Down Electric Vehicle Expansion?

Surging Demand for Electric Vehicle Batteries... Supply Shortage Concerns Rise
Key Raw Material Prices More Than Double Since Last Year-End
Battery Prices Enter Stable Phase, Potential for Rebound

A visitor is examining a vehicle at the Auto Shanghai event held in Shanghai last April.

[Asia Economy Reporter Choi Dae-yeol] There are concerns that the supply of electric vehicle (EV) batteries in China may face disruptions. Despite a dense supply, soaring demand has driven up the prices of key raw materials. China is the world's largest producer and seller of electric vehicles and holds an overwhelming global market share in the mid- and downstream sectors of EV batteries.

It is said that China is practically sweeping up battery raw materials sourced from around the world while also producing a significant volume of battery cells, the basic unit of batteries. As volatility increases in the relatively stable Chinese battery market, which has grown in line with market expansion, attention is focused on how this will impact the global electric vehicle market.

According to data compiled by the KOTRA Beijing Trade Center on the 20th, the amount of EV batteries installed in China in the first half of this year reached 46.4 GWh, an increase of about 165% compared to the same period last year. This was thanks to increased EV sales driven by the new car effect. In July alone, 271,000 units were sold, setting a new monthly sales record.

Major Battery Raw Material Price Trends

As battery demand surged, prices of key raw materials such as lithium, cobalt, and nickel also turned upward. The price of Chinese-made lithium carbonate rose from 52,000 yuan per ton at the end of last year to 124,000 yuan per ton earlier this month, a 2.3-fold increase in nine months. The price of sodium hydroxide rose 2.6 times during the same period. Cobalt and electrolytic nickel, which had fallen to their lowest levels last year, have recently been steadily rising.

With EV sales increasing faster than initially expected, concerns about supply disruptions are spreading among automakers. Although major companies such as CATL and BYD, the world's largest battery makers, have announced large-scale expansions, it will inevitably take more than two to three years to establish stable mass production systems with actual facilities. The fact that Changcheng Motors, which sells the ultra-low-cost Ora series EVs, signed a 10-year long-term contract with CATL, and Volkswagen invested in Chinese battery maker Guoxuan, reflects the growing need to secure a stable battery supply chain.

Employees are working at an electric vehicle battery manufacturing plant in Hefei, Anhui Province, China.

Battery Prices Have Steadily Declined Since the 2010s
Lowering EV Prices and Contributing to Market Expansion
Possibility of Battery Price Rebound if Supply Shortages Materialize

The rise in battery prices in China is an issue that could affect EV production and sales worldwide, not just the local Chinese market. Battery prices in China and international markets have steadily fallen over time. According to market research firm BNEF, battery prices exceeded $1,000 per kWh in the early 2010s but dropped to around $140 last year. When EV adoption was just beginning, battery costs accounted for well over half of the vehicle price, but recently this has fallen to about 20-30%. This is due to economies of scale from increased production and advances in manufacturing technology that use fewer expensive materials.

Korean-made batteries have shown a similar trend. Based on statistics from the Korea International Trade Association, the export price of lithium-ion batteries, mainly used for EVs, fell from around $40 per kilogram in 2019 to the low $30s this year. This represents a 20-30% decrease in simple comparison. Although major battery makers do not disclose specific domestic and overseas sales prices, they acknowledge the price decline compared to the past. A representative from a domestic battery company said, "We lowered production costs by substituting expensive materials and increasing the purchase volume of basic raw materials."

Among the three major Chinese electric vehicle startups, William Li, CEO of NIO, is showcasing the ET7 sedan this January.

While this decline in battery prices has positively influenced the expansion of EV adoption, the situation is likely to change going forward. Since the market is still in its early stages, governments and global corporations find it difficult to respond flexibly to battery supply imbalances. This means that even if demand rises or prices increase, it is not easy to immediately increase supply.

Even if battery makers with a certain scale or new entrants operate their planned factories as scheduled, the industry expects that from 2025 onward, EV demand will increase further, intensifying battery shortages. This suggests that the global EV market, which has been growing rapidly thanks to the eco-friendly trend, may face a slowdown.