China will maintain its leadership in the global clean energy vehicle industry powered by its mass production of cheaper electric vehicle (EV) batteries, according to an industry expert, though it will struggle to surpass technological advances from Asian peers.
“Technically, Chinese battery makers are catching up to the Korean and Japanese battery suppliers. The technology gap is getting smaller, though reliability is still sometimes a question compared with Korean and Japanese batteries,” Stephen Dyer, managing director of global consultancy AlixPartners, said Thursday on the sidelines of the TechNode Emerge 2020 event in Shanghai.
Large Chinese battery manufacturers are among the world’s top producers by volume. However, its low-cost providers still lag Asian peers in technology, resulting in issues such as combustion risk. Beijing has pledged to emphasize quality growth over speed—earlier this month the central government approved a new energy vehicle (NEV) action plan for the next 15 years featuring innovation in key technologies such as EV batteries.
EV battery fire issues linger
China’s battery improvements are a priority amid safety concerns about EVs catching fire. In the latest example, government-backed WM Motor on Wednesday announced a nationwide recall of 1,282 EX5 SUVs after four reports of battery fires in a month.
The company said that impurities in the battery cell production could cause short circuits and potentially, fires. ZTE Gaoneng Technology, a four-year-old battery supplier affiliated with Chinese telecommunications giant ZTE, later acknowledged it was involved in two of the incidents, while WM Motor has not revealed the suppliers for the other two incidents. The EV company works with multiple battery makers to keep prices low, including Chinese battery giant CATL.
WM Motor is the second Chinese EV maker that has issued a recall due to combustion risk. The move could be very costly and overshadow its plan for a listing on Shanghai’s STAR Market scheduled for early next year. Nio last summer recalled 4,803 crossovers due to a battery pack vulnerability which could result in a short circuit, costing the company RMB 340 million ($49.4 million). CATL is Nio’s only battery pack supplier.
Thanks to government support, China leapt into the EV battery big leagues. Four out of the the top 10 battery suppliers in the world are Chinese, according to figures from market research firm SNE Research.
Chinese firms are also catching up on battery performance, with CATL’s latest battery pack reaching parity with Panasonic’s 2170 batteries used in Tesla’s Model 3, which travels more than 500 kilometers (310 miles) on a single charge.
However, the CATL lithium ion batteries sparked a handful of EV fires this year, followed by reports that multiple automakers were abandoning the technology. Panasonic batteries, on the other hand, are known for reliability and performance, thanks to the company’s vast number of patents which prevent overheating.
Advanced EV battery capacity
Nickel, cobalt, and manganese (NCM) batteries, including CATL’s NCM 811 battery, are naturally more unstable. A growing number of automakers in China are thus turning to lithium-iron-phosphate (LFP) batteries from a safety and cost perspective, Daniel J. Kollar, head of Automotive & Mobility Practice at business development consultancy Intralink Group, told TechNode.
Some progress has been made in China. BYD’s newly designed LFP battery has enabled a driving range for its flagship sedan model, the Han, similar to Tesla’s Model 3. The company, however, does not manufacture the batteries for other automakers, signaling production capacity limitations. The average density of LFP battery cells meanwhile are less than half that of Panasonic’s NCA batteries, Reuters recently reported citing a Panasonic executive.
“Great things are happening with LFP for certain applications, but it just can’t compete with NCM with regards to long-range applications,” Kollar said.
Looking ahead, analysts expect NCM battery technology, which accounted for more than 60% of total EV battery demand last year, will remain the dominant battery type in China due to a higher energy density that offers a longer driving range. Chinese makers are looking to innovate the structural design of EV batteries to improve safety without undermining performance and increasing cost. “There is an argument in the industry now about whether this should be done at the cell level or the pack level,” Kollar added.
An evolving industry
A cheap battery producer in the past, Chinese battery makers are moving up the industry value chain by building more technologically advanced capacity to replace obsolete facilities. As the country moves toward its goal of becoming a clean energy vehicle powerhouse, a wave of consolidation is expected in the coming years.
With billions of RMB invested in the EV industry, China has dominated the world’s production of lithium-ion EV batteries, accounting for 77% of total capacity this year, according to figures from Bloomberg NEF. However, only 30% of capacity has been utilized, with lower-end battery makers seeing falling demand, Chinese media reported last week citing Zheng Mianping, a member of Chinese Academy of Engineering.
“We’ve seen a lot of companies came in and failed in the Chinese steel and solar industries, and the battery sector is going to follow that trajectory,” Tu T. Le, founder and managing director of business intelligence firm Sino Auto Insights, said during the panel discussion.