据新浪财经，在电池上游领域的正负极、电解液、结构件等环节，寒锐钴业、中元股份、新宙邦、多氟多、震裕科技等诸多企业从2023年下半年开始陆续公告终止、缩减了部分投资计划。J.P. Morgan believes that over 700 GWh of “fixed assets under construction” will not be fully digested by the end of 2027. This phenomenon is particularly evident among second-tier battery manufacturers. Third-tier companies are likely to run out of cash and quietly exit the market in the next few years. However, considering that the market is already concentrated, the exit of these companies has had little impact on the competitive landscape of the industry.
In recent years, with changes in market supply and demand, major Chinese battery manufacturers have begun to adjust production capacity expansion plans.
Recently, a large lithium mica company in Yichun confirmed that the mining in Yichun during the Ningde era had indeed stopped production; news of the “maintenance” of the domestic lithium carbonate giant Zhishun Lithium Group spread in the industry, and many people in the industry regarded this as a signal for the industry to “cut production and insure prices.”
According to Sina Finance, in the upstream battery sector, many companies such as Hanrui Cobalt, Zhongyuan Co., Ltd., Xinzhoubang, Polyfluoride, and Zhenyu Technology announced the termination and reduction of some of their investment plans starting in the second half of 2023.
However, J.P. Morgan said that despite the slowdown in production capacity expansion, there is still more than 700 GWh of potential production capacity that has not been digested, and it will take time for some second-tier battery manufacturers to digest production capacity.
Battery production capacity of more than 700 GWh is still in “fixed assets under construction” and is expected to be digested by the end of 2027
J.P. Morgan Chase pointed out in the latest research report that the current 2025 production capacity plan guided by industry insiders will drop 25-80% from the target set two years ago. According to company guidelines, the production capacity forecast for 2025 was reduced by 35% compared to the end of 2022. This reflects the cautious attitude of battery manufacturers regarding changes in market demand. The industry's capacity utilization rate is improving, and the overall capacity utilization rate of the industry is expected to increase by 2-3 percentage points in 2025.
So where did the planned production capacity project go? J.P. Morgan believes that a large amount of production capacity has now been put on hold as “fixed assets under construction.”
Currently, China's battery production capacity of more than 700 GWh is still in a “fixed asset under construction” state, and most of these projects have yet to be launched or are yet to be fixed.
J.P. Morgan predicts that this production capacity will not be fully digested until the end of 2027. This phenomenon is particularly evident among second-tier battery manufacturers. For example, the fixed asset construction scale of China Airlines reached 46 billion yuan at the end of 2023, higher than the 25 billion yuan in the Ningde era.
The challenge of second-tier manufacturers
J.P. Morgan also pointed out that second-tier battery manufacturers chose to delay converting “fixed assets under construction” into official fixed assets in order to avoid including depreciation expenses in financial statements. However, this has also affected the revenue of these companies' equipment suppliers, such as Wuxi Pioneer and Hangke. According to calculations, its revenue fell 10-20% year over year in the first half of 2024.
Specifically, the proportion of second-tier enterprises converted “fixed assets under construction” into fixed assets in the first half of 2024 was less than 20%, while the conversion rate during the Ningde era, the industry leader, reached about 40%.
Increased market concentration, overseas expansion, and accelerated domestic production capacity competition
Despite the pressure of overcapacity in the industry, the leading company Ningde Era maintained a stable market position.
According to the J.P. Morgan Chase report, the market share of China's top five battery manufacturers (CR5) has increased from about 50% in 2015 to 87% now. Among them, the market shares of Ningde Times and BYD have remained stable at around 73-74%. CR10 rose from 60% to 97%. Concentration is expected to continue to rise over the next three to five years.
Excess production capacity mainly comes from third-tier manufacturers. J.P. Morgan notes:
Third-tier companies are likely to run out of cash and quietly exit the market in the next few years. However, considering that the market is already concentrated, the exit of companies other than the top 10 has little to do with the competitive landscape of the industry.
In addition to the domestic market, Chinese battery manufacturers are also speeding up the expansion of overseas markets.
The report points out that companies such as Ningde Era and Everweft Lithium Energy plan to launch new production lines in Hungary and other places after 2026, which will put some pressure on domestic capacity utilization. As international production capacity is gradually released, this may increase the pressure on domestic capacity utilization.
