us outbreak to impact China’s battery storage production

The Covid-19 outbreak has caused a slowdown of China’s economic growth, and with China being a global manufacturing hub, is having a negative impact on the world economic growth as well.

The majority of the factories remain closed or are not able to attain full production capacity due to shortage of staff and raw materials. These actions have negatively impacted stock markets across the world. Corresponding to the spread of this Covid-19 outbreak, risks are on the rise.

The current scenario in China is going to have an effect on the global clean energy sector, including renewable energy sources, battery energy storage, electric vehicles (EVs), and renewable heat and cooling. China is a world leader in renewable energy investment, which can be seen in the country’s wind power installation; wind turbine manufacturing and solar photovoltaic (PV) manufacturing.

The country is increasing its portfolio of renewables, decreasing coal consumption, and enhancing efficiency in an effort to deal with carbon emissions. The Chinese Government has also been involved in numerous measures to boost strong battery manufacturing with the aim of being a leader in the global battery market.

China’s battery manufacturers, supported by the government’s industrial expansion vision, are coming up with massive battery production plants. CATL and BYD, two of the largest battery manufacturers in China, are widening their production capacities abroad backed by the Chinese Government.

Lithium-ion (Li-ion) batteries are the undisputed market leader in the electrochemical storage projects across the world. The global LI-ion battery market is dominated by players such as Panasonic, LG Chem, Samsung SDI, BYD and CATL. Their position will strengthen over the next five years but with a tilt towards Chinese suppliers, led by BYD and CATL.

As of December 2019, the number of Li-ion battery megafactories that are in pipeline to 2029 stood at 115, with 88 of them in China. Europe’s planned Li-ion battery capacity is 348GWh by 2029, while China’s pipeline stands at 564GWh by 2028. The total Li-ion battery capacity which is under pipeline is equivalent to 39 million EVs by 2029. Encouraging government policies, huge manufacturing base, protectionist measures, along with rising demand for batteries augur well for the Chinese battery market.

China, a battery manufacturing powerhouse in the world, is now dealing with a slow down with the Covid-19 outbreak. China’s major Li-ion manufacturing players, CATL and BYD, are faced with a high probability of additional production delays. China’s attempt to fight with the Covid-19 outbreak has led to delayed production across a number of battery production facilities located in key Covid-19 hit provinces.

Even Tesla’s gigafactory in Shanghai is hinting at possible supply shortages for the US, UK and Australia. The limitations on labour movement will hit hard battery production facilities located in the Covid-19 hit provinces, which are expected to contribute to battery cell production this year. This Covid-19 outbreak is expected to cost Chinese battery manufacturers with around 26GWh of output in 2020.

Most of China’s lead-acid battery manufacturers have restarted their production following the coronavirus outbreak. For example, Leoch, a major global manufacturer of lead-acid batteries has resumed operations of its five battery factories, including a Li-ion battery factory, in China.

When it comes to battery energy storage, China’s BYD has been a key supplier for the UK energy storage markets, and hence the company’s production losses in Q1 2020 could damage British developers. Also, in Australia, BYD has been involved in a number of energy storage projects that are in the pipeline, hence affecting this country also.

Globally, carmakers are looking for independence from the current supremacy of Chinese battery manufacturers and aiming to secure their battery supply chains. The industry’s over-dependency on China has been showcased recently with the Covid-19 outbreak leading to disruptions in the supply of components. China itself is expected to take a beating on the production of around one million vehicles.

Many automakers are worried about this outbreak causing production halts. Fiat Chrysler stated that it was weeks apart from halting production of its European plant after the automaker found it difficult to source major parts from Chinese suppliers. Other major automakers such as PSA Group, General Motors, Daimler and Ford also have plants which produce parts in and around the Chinese province of Hubei, the epicentre of the Covid-19 outbreak.

Mainland Chinese markets witnessed a sharp fall on 3 February after a trading break since 23 January because of the Covid-19 outbreak. The Covid-19 outbreak has impacted the stock prices of major Chinese battery manufacturers and automakers. EV maker BYD’s share has devalued by 10% since 25 January 2020.

Shares of state-owned companies SAIC Motor and Chongqing Changan Automobile Co. Ltd devalued by 9.3% and 10%, respectively. While the shares of CATL have devalued by 32% since 6 February 2020, Chinese auto start-up Nio’s shares have devalued by 54% since 21 January 2020.

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