Can China's lithium-ion battery giant surpass Tesla in three years?

The Chinese lithium battery industry is catching up at an alarming rate: in less than three years, the country could be home to a giant lithium battery maker that surpasses Tesla's super battery plant.

According to Bloomberg new energy finance, a think-tank, if the country's leading battery makers can meet their scheduled production targets, China's lithium battery capacity will reach 121 gigawatt-hours (GW) a year by 2020. In contrast, Tesla's super battery plant in Nevada, USA, reached its maximum capacity in 2018 and produced an annual energy storage battery of 35 gigawatts. One gigawatt hour can provide 40,000 electric vehicles to travel 100 kilometers.

Now lithium-ion batteries are like the solar panel industry a decade ago. When Chinese companies poured in and dominated the photovoltaic panel industry chain, the cost of solar panels fell by 70 %.

Goldman Sachs reports that accelerating the transition to electric power in the automotive sector will be a period of rapid development of lithium-ion battery technology for at least the next decade. By 2025, the global market for lithium-ion batteries will reach $40 billion, and Chinese producers could "dominate" the industry.

Behind the rapid rise of China's lithium-ion battery industry is China's rapidly emerging supply chain of new energy vehicles, as well as the government's massive stimulus and support policies.

China is expected to have 5 million electric vehicles on the road by 2020, five times the current number. Government subsidies to the electric vehicle industry have totaled billions of dollars since 2012, making BYD the world's largest maker of electric buses and cars, with a market value of about $18.7 BN.

In 2016, when the capacity of CATL in Fujian reached 7.6 gigawatts, Huangshilin, the company's president, said in an interview that the company's total lithium capacity target is expected to reach 50GWh by 2020. CATL is the only company in China that provides battery systems to foreign car companies. Its customers include BMW and Volkswagen.

The Chinese government's new energy policy is also encouraging the lithium battery industry to rapidly become more intensive. New regulations on subsidies for new energy vehicles, released last year, require subsidized car battery makers to produce at least eight gigawatts a day in the future to qualify for subsidies. The rule means that only big lithium-ion battery makers such as BYD or CATL are eligible for subsidies.

Since Sony started the commercialization of lithium batteries in 1981, from hearing the iPhone, the lithium battery industry chain has been in the hands of Japanese and Korean manufacturers such as Panasonic, LG, and Samsung. Tesla's super battery plant is a joint venture with Japan's Matsushita.

However, after entering the second decade of the 21st century, the lithium battery industry in China quickly caught up. In 2013, it replaced South Korea as the world's largest supplier of lithium batteries. China sold more than 500,000 pure electric, plug-in hybrid vehicles in 2016, up 50 per cent from a year earlier.

While Panasonic remains the world's largest supplier of electric car batteries, China's BYD and CATL are already behind, according to research firm Bernstein.

"The Japanese invented lithium batteries and the Koreans expanded their use, but ultimately the Chinese will dominate the market," said Duncan Goodwin, head of global resource strategy at Barings, an investor management firm. We will witness domestic demand that will lead to leapfrogging development of the lithium battery industry. "

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