Lithium batteries in China

This article contains content that is written like an advertisement. Please help by removing promotional content and inappropriate external links, and by adding encyclopedic content written from a neutral point of view. (June 2021) (Learn how and when to remove this template message)

One of the major drivers of the demand for lithium-ion batteries comes from the electric vehicle industry, since lithium-ion batteries have high energy density for their weight. In the decade since 2008, the production of lithium batteries has tripled. China is a major producer of both lithium and electric vehicles, with its favorable policies for manufacturers and consumers. China produced more than 15 billions units of lithium batteries in 2019, which accounts for 73% of the world’s 316 gigawatt-hours capacity. They were exported mainly to Hong Kong, United States, Germany, Korea, and Vietnam,

Background[]

Prior to the invention of lithium battery technologies, the leading rechargeable batteries were produced with lead-acid. Although the production cost is cheaper, lead-acid batteries are inferior in their capacity, depth of recharge, efficiency, and lifespan.^[1] Charging lithium batteries are four times faster than lead-acid batteries, making it more conceivable for frequently used applications such as mobile-phones. Further, lithium battery is 55% lighter than its counterpart which is an significant metric in applications such as electric vehicles which consumes energy based on the total weight of the system. Lead-acid batteries have a lower lifespan with preferred 100% state-of-charge to keep their conditions.^[2]

Lithium battery technologies are inseparable from our daily lives as they live inside each of our smartphones, laptops, and many other portable devices.

History of Lithium Battery in China[]

In the 1990s, China came across its first breakthrough with its state enterprise China Electronics Corporation successfully developing its own Model 18650 lithium battery which was ready for mass production. Although in this early stage, there was not much capital invested in the market, most of the research was dedicated to small consumer electronic products such as translators, music players, or cameras. With all of the varying consumer products, there are different needs for its battery, thus there is not a centralized demand for heavy research in the field. From 2001 to 2008, early players like BYD, Shenzhen Bike Battery, Tianjin Lishen Battery have grown their investments in battery research and brought substantial growth in the Chinese lithium battery industry. From 2008 to 2016, the rise of smart devices like cell phones, tablets, or laptops prompted further demand for batteries. Since then, many technology companies have sourced their batteries from China for their advancement in battery development and competitive pricing. However, there were moments of stagnation during this period with issues of scaling and meaning the demands from across the world. Also during this time, concepts such as electric vehicles have become more prominent but require more research. Since 2016, the Chinese government has set very favorable policies for electric vehicle development. These policies include providing loans to manufacturers, different tax breaks enjoyed from the entire supply line, or invitation for foreign investments and consumption for their battery products. Currently, the lithium battery industry in China continues to grow under the accelerating trend for electric vehicles, applications in military equipment, 5g services, and more.^[3]

Lithium Battery Market in China[]

Prior to 2000’s, battery production was dominated by Japan with its superior technologies, by companies like Panasonic, 88% of the world’s lithium battery production. In the following two decades China invested heavily on its sourcing and manufacturing processes. Since 2015, China surpassed Japan, Korea, and the rest of the world and became the largest exporter of lithium batteries. Combined with Japan and Korea, China and the two countries account for 95% of lithium battery production in the world.^[4]

China has the fourth largest known lithium reserve with 1 million tons, behind Chile, Australia, and Argentina. Thus making them one of the biggest exports and capable candidates for developing lithium battery technologies. China continues to buy stakes in mining operations around the world. The world largest lithium mine in Australia, Greenbushes, is controlled by China’s Tianqi Lithium with its 51% stake.^[5]

In the decade since 2010, the market capitalization of China’s lithium battery has had an average annual growth of 14%.^[6] Of China's more than 15 billions units of lithium batteries produced in 2019, China mainly exported to Hong Kong, United States, Germany, Korea, Vietnam, and others, where products and applications of the batteries are manufactured.^[7]

Source: The General Administration of Customs of China

Production[]

China’s crucial role in the development of lithium batteries can be highlighted with its lithium cell manufacturing capacity which accounts for 73% of the world’s 316 gigawatt-hours capacity. It’s competitive edge comes from the low labor and production costs which attract foreign companies that can only find more expensive quotes from their local suppliers. In 2019, there were 131.6GWh produced in China, and Cairn Energy Research Advisors projects an annual production of 800 GWhs by 2027.^[8] The battery production with respect to the consumer demand is near saturation in China, however consumer demand for lithium batteries applications on vehicles is expected to have continual growth in the upcoming decades.^[9] The current market capitalization for lithium batteries in China is 190 billion yuan (roughly 30 billion dollars), it is projected that by 2026 the market capitalization will reach 268 billion yuan(42 billion dollars).^[10] During the Covid-19 pandemic, growth in the industry was higher than expected, not only did it not slow down, but had accelerated. It came from China’s quick recovery and reopening of manufacturing, along with the rise in demand for new energy vehicles in Europe.

The highest cost of electric vehicles comes from their battery packs, which accounts for 30% of the manufacturing cost of a car. In the past decade, scientists and manufacturers were able to reduce the cost from above $1,100 per kilowatt-hour to $137/kWh in 2020.^[11] This is a significant 89% drop in the cost for both lithium batteries and the production of an electric vehicle.

Market Segment[]

Lithium battery products are divided into many categories with the selection in electrolyte material, battery shape, anode/cathode material, covering material, and whether or not it is rechargeable.^[12] Different selection of these categories determine different variations of lithium battery products. There is micro competition within the Chinese battery manufacturing companies to achieve the best quality production with the cheapest cost. Recently, there is a growth in using man-made graphite in replacement of graphite ore. In 2020, man-made graphite dominated the material selection for anode and cathode with 84% of market shares.^[13] In the upstream of lithium battery production, there is material sourcing from lithium, cobalt, manganese, and nickel mines, along with graphite ore. Upstream also includes processing these materials from the mines into electrolytes, cathodes, anodes, etc. Midstream involves the design of the battery and manufacturing the batteries from electrolytes, cathodes, anodes, and other pre-processed parts. Downstream is the application of lithium batteries, such as cellphones, laptops, and cars.^[14] There are three main categories for products in the downstream - energy storage, consumer, and motor. Motor has the largest share with 53.95%, with consumer in second 43.16%. Consumer segment is near saturation, while the motor segment is witnessing fast growth global policies favoring electric vehicles. There are currently 72 Chinese companies in the race to produce lithium car batteries with Contemporary Amperex Technology leading with 50% of market share.^[15]

Electric Vehicles in China[]

China is the world’s largest consumer of electric vehicles, with 400,000 electric buses in 2019, it houses 99% of the world’s electric buses.^[16] With Chinese policies favoring electric cars both for manufacturers and consumers, 1.3 million EVs were sold in China in 2020 alone, which represented 41% of global EV sales.^[17] China has the goal of pushing electric vehicles to become 40 percent of all car sales by 2030.^[18]

In 2020, 46.5% of lithium battery demand comes from electric vehicles,^[19] far exceeding the previous lead of smart mobile devices. As the largest consumer of EV, China itself has a large demand for lithium batteries to produce these EVs. In April 2021, China has reported a total of 8.4 GWh of lithium batteries installed in their electric vehicles, this represents a 134% increase from the year before.^[20]

Lithium Battery Related Companies in China[]

Ganfeng[]

is the largest lithium supplier in China and third largest in the world, it is vertically integrated so include in its business resource development, refining and processing, battery manufacturing, battery recycling, and other. It has a leading advantage with its patented inventions throughout the battery productions such as extraction technologies, recycling technologies from lithium wastes, and more. All of these pioneering technologies contribute to a high energy conversion efficiency and long life energy storage.^[21]

Contemporary Amperex Technology[]

Contemporary Amperex Technology is one of the largest lithium battery producers in China and was responsible for 45.5% battery installation in the country.^[22] In 2019, Contemporary Amperex Technology has a net income of 39.14 billion yuan with 18% of China’s lithium battery exports. During that year it had more than 32 GWh of lithium battery installation for electric vehicles, placing it first in the world ahead of Panasonic of Japan and LG of Korea.^[23] It provides lithium batteries for many companies around the world. Contemporary Amperex Technology is a long time supplier for Tesla, which uses its LFP batteries to build its latest models. Lithium iron phosphate batteries (LFP) tend to have a lower energy density compared to traditional lithium batteries that also utilizes cobalt, but have been sought after by the competitive price advantage without the expensive element. Recently, the company has made significant progress in LFP with changes to the battery architectures that improved its energy density, thus allowing the battery for wider EV use.^[24]

BYD Company[]

As one of the early leaders in China’s lithium battery industry, BYD Company along with other early players were responsible for the rapid development that transitioned China from a mimicker to a leading developer.^[25] It has since transitioned itself into the automaker industry. With split focus, it was responsible for 14.6% of the lithium batteries installed in electric vehicles countrywide in the first quarter of 2021.^[26]

NIO[]

NIO is one of the leading electric vehicle brands in China. Currently it does not produce its own lithium batteries and have relied on sources such as Contemporary Amperex Technology, however, to help achieve better margins for the sales of their electric cars, they have invested heavily in the factories and research in lithium battery technologies.^[27] Recently they have launched a program for battery swapping which allows users to swap out their used battery for a fully charged battery in public stations. The program aims to tackle the problem of charging time and limited charging stations in the country, also by displacing the battery removing battery ownership from part of the vehicle, the cars could be sold at a much cheaper price.^[28]

Challenges and Controversies[]

The procedure to produce lithium batteries is long and complex, from mining, to refining, cathode production, cell production, to module assembly, before passing on to original equipment manufacturers. Each of those steps encompass many microsteps that require precision and time to ensure its quality. Take the procedure of formation or aging within module assembly, it could take up to 3 weeks for each batch which contributes to 30% of the manufacturing cost.

As most mining processes are invasive to the surrounding area, lithium mining has also met serious controversies with regards to the impact it has on the surrounding area. A controversy of the lithium mining comes from its need for water - mining one ton of lithium requires 500,000 gallons of water. Yet, the largest mines in the world reside in Argentina, Bolivia and Chile, which often face droughts and have serious demand for fresh water by the local farmers. Thus the extraction of lithium has often been linked to increased droughts.^[29] In several of the lithium mines there are reports of chemical leaks in the nearby water source, these chemicals such as hydrochloric acid are toxic to living organisms. Other reports may attribute lithium mining to damages to the soil and air contamination. Thus, some activists have warned about the environmental impact of lithium mining.^[30]

Environmental Implications[]

As the world starts to act on the climate crisis, many countries have set targets to lower carbon emissions. Many countries are slowly moving to ban gasoline-powered vehicles on the road - Norway with targeted tradition completed by 2025, and the U.S, Japan, and many other European countries set their timeline near 2035.^[31] During this transition, lithium would continue to have a trending relevance in the production of electric vehicles. In 2019 transportation accounts for 28% of energy consumption in the United States.^[32] This means a total shift from petroleum, biofuels, natural gas, or other fuels that currently power our cars could mean a 28% reduction in our CO2 reduction. While we are searching for alternative energy sources from windmills, solar panels, hydropower, or nuclear fusions, lithium batteries play an important role as storage units for applications such as electric vehicles.

Lithium batteries and electric vehicles do not directly reduce carbon emissions, as energy that is stored in car batteries can still come from many different sources, such as fossil fuel burning. However, the advancement of lithium batteries allowed for the development of electric vehicles which removed our dependence on gasoline to power our vehicles. As the world continues to find alternative energy sources for generating electricity, we would have the containers and platform to power our vehicles without gasoline.

A bottleneck of the development of electric vehicles comes from the availability of charging stations. Although China has currently set up the most charging stations in the world, with more than 1.32 million stations, of which 550,000 of those are for public use, these numbers are still far from the needs of all electric vehicle users if it wishes to scale.^[33]

References[]