Zhong Guo Qi Che Bao Wang·2025-12-08 09:19Core Insights - The Chinese electric vehicle (EV) market is experiencing a "battle for battery supply" as companies rush to secure battery resources ahead of a significant tax policy change set to take effect on January 1, 2026 [2][3] - The impending reduction of the EV purchase tax from full exemption to a 50% reduction has triggered a surge in demand, leading to a scramble among automakers to lock in battery supplies [3][4] - The rapid growth in EV demand is creating a mismatch with battery production capacity, exacerbated by structural issues within the battery industry [2][5] Demand Surge - The demand for EVs has surged due to the impending tax policy change, with automakers offering purchase tax guarantees to customers to stimulate sales [3][4] - In the first ten months of 2025, China's EV production and sales reached 13.015 million and 12.943 million units, respectively, both showing over 30% year-on-year growth [4] - The domestic battery installation volume reached 84.1 GWh in October 2025, marking a 10.7% month-on-month increase and a 42.1% year-on-year increase [4] Supply Constraints - Battery production capacity is lagging behind demand, with a typical production line taking 18 months to become operational, and high investment costs of 150-200 million yuan per GWh [5] - The supply chain is further strained by rising prices of key raw materials like lithium carbonate, which increased by 20% year-on-year to 93,900 yuan per ton as of December 3, 2025 [5][10] - The current supply-demand mismatch is characterized as a structural issue rather than an absolute shortage, with experts predicting a return to more rational demand levels post-policy implementation [6] Technological Advancements - The battery industry is undergoing rapid technological innovation, with advancements in lithium iron phosphate and nickel-rich batteries posing challenges to existing production capacities [7][8] - The shift towards new battery technologies creates risks for production investments, as companies must adapt to avoid obsolescence [8] - The market is increasingly concentrated, with the top five battery manufacturers holding an 81.8% market share, indicating a decline in capacity utilization among smaller firms [8] Resource Allocation Challenges - The explosive growth of the energy storage sector is diverting battery production capacity, as both energy storage and EV batteries share similar technological resources [9][10] - Companies are prioritizing energy storage orders due to higher profit margins, which complicates the balance between energy storage and EV battery production [10] - The Chinese government is taking steps to regulate competition in the battery industry to promote high-quality development and address capacity allocation issues [10] International Market Dynamics - While the Chinese market faces battery supply shortages, the U.S. market is experiencing a contraction in battery projects due to concerns over oversupply and insufficient demand [11][12] - The disparity between the two markets is attributed to different stages of industry development, with China in a growth phase and the U.S. still in a cultivation phase [12] - Chinese battery companies are positioned to leverage their technological and cost advantages to expand into international markets, particularly in regions experiencing rapid EV growth [12]