After the booming domestic market, Chinese electric vehicle battery companies are also becoming major exporters. It has been proven that the efforts made by Western countries to protect their own markets may have been too few and too late.
Chinese companies are also focusing on expanding new factories on a large scale in free trade partner countries in Europe and the United States, in order to avoid current and future import restrictions, as Japanese automakers did in the United States in the 1980s.
According to data from the China Association of Automobile Manufacturers, sales of new energy vehicles in China, including plug-in hybrid vehicles, surged by 37% year-on-year in the first nine months of 2023. However, exports have also grown significantly: China is currently the world's largest exporter of electric vehicles.
This in turn has boosted the development of China's battery industry. Ningde Times New Energy Technology Co., Ltd. (referred to as "Ningde Times") and car manufacturer BYD have become the world's top two electric vehicle battery manufacturers.
In markets outside of China, Chinese battery manufacturers still lag behind their Korean competitors, with the top three Korean battery manufacturers occupying nearly half of the market share. But if Ningde Times continues to maintain the same growth momentum as this year, this situation may quickly change.
The vehicle level AI intelligent power battery factory of Svolt's headquarters in China.
According to SNE Research, LG Energy Solution, the top battery manufacturer in South Korea, saw a 60% increase in sales outside of China in the first eight months of 2023 compared to the same period in 2022. However, Ningde Times' overseas sales have more than doubled, and its market share outside of China is currently on par with LG New Energy, both at around 28%. SK On, the second ranked battery manufacturer in South Korea, saw a sales increase of only 16%.
Meanwhile, according to HSBC data, Ningde Times' market share in Europe has risen to 24% this year and 10% in 2020. This is partly due to the installation of Ningde Era batteries in the cars exported by Tesla's Shanghai factory. However, this battery manufacturer also supplies European automakers such as Stellantis and Mercedes Benz.
With the intensification of domestic competition, overseas sales may become more important for Chinese battery manufacturers. Goldman Sachs believes that Chinese battery companies have much higher profit margins overseas. For example, the bank predicts that by 2025, approximately 70% of the profits of Volkswagen's Chinese supplier, Gotion, will come from exports or overseas production. The company's factory in Germany has been put into operation this year and is building a $2 billion battery factory in Illinois.
Geopolitics is a major risk facing this situation. The Inflation Reduction Act of the United States stipulates that a certain proportion of the batteries used in subsidized electric vehicles must be produced in the United States or free trade partner countries. The European Union has launched a countervailing investigation into electric vehicles imported from China and set a goal of 40% localization of clean technology by 2030.
But China's battery industry is already trying to bypass these restrictions. Goldman Sachs stated that Chinese companies have announced overseas investments in the fields of batteries and materials exceeding 200 billion yuan (equivalent to 27 billion US dollars). More than 80% of the investment is in Europe.
Hungary is particularly a popular destination. Ningde Times plans to invest approximately $7.7 billion to build a factory in Hungary, which, once completed, will become the largest battery factory on the European continent. Hungary is one of the EU member states that is relatively friendly to China and has relatively low labor costs.
Morocco, which has signed free trade agreements with both the European Union and the United States, is another country that is expected to benefit. Guoxuan High Tech has signed an agreement with the Moroccan government to study the establishment of a battery factory in the country, with a final planned investment of 6.4 billion US dollars. Huayou, a Chinese mining company, will collaborate with LG Chem in Morocco to build a factory for refining lithium and producing cathode materials.
China's overseas battery competition will not be a smooth journey, but China's leading battery companies are ready to bypass the obstacles on the journey. For the United States, especially Europe, this can have both advantages and disadvantages. In the long run, Chinese battery technology may penetrate European suppliers and help establish local ecosystems, just as Tesla and Apple have helped upgrade China's electric vehicle and smartphone industries, respectively.
However, in the short term, this may mean that the United States or Europe may struggle to establish a benchmark for companies in the Ningde era.

Lithium is a key metal in the manufacturing of batteries and plays an important role in the world's transition from fossil fuels to green energy. China is a global leader in lithium processing and is venturing heavily in Latin America and Africa to ensure lithium mineral resources. Now, the United States is trying to develop its own lithium industry chain to reduce its dependence on China. What are its chances of winning? Cover image production: Jamie Leventhal