As governments erect protectionist barriers to block a flood of Chinese-made batteries, Chinese battery makers are responding by expanding investment in overseas production, industry data showed. Severe oversupply at home, which has left the domestic market with little room to grow, is another reason the industry is accelerating its move out of China.
Blocking Chinese batteries has instead accelerated their expansion abroad
Chinese companies struck 14 overseas investment deals worth a combined $12 billion this year, the Financial Times reported on the 21st, citing data from Climate Energy Finance, an Australian research institute.
Cumulative investment announced since 2023 has reached $90 billion, with $52 billion directed at battery cell manufacturing and the remaining $38 billion at battery materials production. By region, Southeast Asia accounted for the largest share at $35.2 billion, followed by Europe at $31.5 billion.
CATL, China's largest battery maker, which already operates plants in Germany, Hungary and Spain, is scouting additional sites in Europe. "We are in discussions with governments across Europe," CATL Chief Technology Officer Zhu Lingbo told the FT, referring to talks on building plants.
Gotion, another major Chinese battery maker, announced last month that it would invest more than 1 billion euros to produce batteries in Spain, Slovakia and Morocco in partnership with Germany's Volkswagen.
Analysts say the trade barriers countries are building to curb inflows of Chinese batteries are instead quickening the industry's push overseas. The FT said Chinese battery makers have concluded that global policy is tilting toward protectionism and localization, leaving China little choice but to shift its supply chain strategy toward offshore production.
Overproduction also speeds Chinese battery makers' move out of China
Neijuan, or ruinous price competition, has stalled growth in China's domestic battery industry, pushing production abroad. CATL, the industry leader, posted third-quarter net profit of 21.25 billion yuan, up 14.5% from a year earlier. That growth rate fell far short of the market consensus of 41.2% and was the slowest since the fourth quarter of 2024, when profit rose 13.6%. One factor behind the weaker results is that Chinese electric-vehicle makers, whose profitability has deteriorated amid overproduction, are reducing their reliance on CATL and pushing down battery procurement prices.
To address the glut, Chinese authorities last month fully scrapped a consumption tax exemption for lithium-ion batteries and decided to eliminate the value-added tax export rebate on battery products entirely from next year.
Building a battery plant in Europe costs Chinese manufacturers about three times as much and takes three times as long as building one in China, the FT said. Even so, the companies are pressing ahead with direct overseas expansion. "Companies have to go abroad to survive," said Du Fu, a China battery analyst at consultancy Rystad, in remarks taken to mean that growth at home can no longer be expected.
China's grip on the supply chain is not expected to weaken even as battery production moves offshore. Wood Mackenzie estimates that Chinese companies account for more than 80% of global output in the four key raw materials needed for battery production, and projects that the share will not decline through 2034 even as production shifts overseas.
China's dominance of the supply chain is expected to hold even as battery manufacturing relocates outside the country. The FT said CATL and its peers are asking their Chinese suppliers to follow them abroad, describing the pattern as transplanting a China-centered supply chain onto foreign soil.
