China's Battery Makers Thrive Amid Capacity Concerns
In the rapidly evolving landscape of energy storage, a fascinating contrast emerges in the industry. While whispers of overproduction circulate online, the sentiments from within the sector often point towards a pressing need for more capacity. This dichotomy was poignantly expressed by an employee at a prominent PACK manufacturing company that primarily serves overseas markets. The excitement around their business prospects reflects a prevailing belief: find the right market niche, and engaging in international business feels akin to 'picking up money'.
The past two months have perhaps been the busiest and most exhilarating for Chinese energy storage manufacturers. With a flurry of international exhibitions taking place, these events are not mere networking opportunities; they have manifested into pivotal moments for securing lucrative contracts and expanding customer bases.
September alone saw a staggering array of energy events, including the third EESA battery storage exhibition, the RE+ conference in the U.S., and various solar and storage exhibitions across Europe, Mexico, and the U.K. Industry giant Yiwei Lithium Energy, for example, dedicated an impressive 17 of its 29 public posts in September to showcase its exhibition activities. This focus on trade shows underscores their critical role in helping Chinese manufacturers land significant international contracts.
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Take, for instance, the RE+ event held in the U.S., which featured over 300 Chinese companies in the solar energy and storage sector. Contracts were being signed left and right, highlighting an insatiable demand for energy solutions. Key players like Chenergy and Bison Energy entered into a supply agreement for a 1.5GWh energy storage system, while companies such as Yinko Energy secured agreements for projects totaling hundreds of megawatt-hours. Even leading powerhouses like Guoxuan High-Tech walked away with orders exceeding 2GWh.
The proactive nature of large manufacturers does not stop at trade shows. In September alone, Yiwei’s subsidiary, Yiwei Power, signed a staggering supply contract worth 19.5GWh with AESI, a major player in the U.S. energy storage sector. Similarly, Sungrow successfully partnered with UK’s renewable energy firm Penso Power and investment company BW BW ESS, locking in contracts amounting to 1.4GWh. Even BYD made strides in Spain, substantially increasing its original contract with local firm Grenergy Renovables from 1.1GWh to an impressive 3GWh.
The data from China Energy Storage Network suggests that between 2024 and 2026, global installed energy storage capacity is anticipated to reach 223 GWh, 343 GWh, and 456 GWh, respectively. This monumental growth reflects an annual increase projected at 48%, 54%, and 33%. Chinese manufacturers, irrespective of their size, are poised to play an integral part in this global transition to energy storage solutions. This year alone, statistics from CNESA show that Chinese companies signed contracts totaling over 80GWh, with around 50GWh earmarked for overseas markets.
Further illustrating this phenomenon, reports from Think Lithium disclose that sizable back-to-back orders have become a norm. Market leaders such as CATL, BYD, Yiwei Lithium Energy, and Guoxuan High-Tech have ramped up their production lines to meet the considerable demand expected in the latter part of the year, fortifying their inventory as they prepare for the peak season ahead.
What emerges here is a palpable willingness to embrace international markets, particularly as opportunities present themselves in regions experiencing significant power challenges. For example, Europe faced unusual circumstances this past summer, with countries like Germany, France, Spain, and the Netherlands grappling with negative electricity prices, meaning generation outstripped consumption. This unusual market behavior forces power plants to subsidize excess electricity, sometimes even paying consumers to consume energy, highlighting a critical gap in storage infrastructure.
This market condition signals not so much a wealth of opportunity but rather a problematic oversight in grid planning and storage facility deployment. Tian Qingjun, president of Envision Energy, encapsulated this idea by stating, "Energy storage is essentially about transactions — it involves charging and discharging." This notion underpins the potential for Chinese manufacturers to provide essential collaboration to foreign clients in need of effective storage solutions.
In myriad contexts, current opportunities for Chinese energy storage providers resemble a treasure trove waiting to be mined. The competitive edge found in this intense segment of the industry can be attributed to several factors unique to Chinese manufacturers.
First, while Chinese production still relies on imported lithium to support battery manufacturing, the advancements made in domestic manufacturing capabilities and the stabilization of lithium prices have culminated in an unparalleled value proposition. The technological advancements and reductions in costs fortify China's position in the energy storage market, prompting calls from the industry to move away from price wars while simultaneously showcasing instances where companies struggle to fulfill their orders due to unexpectedly high demand.
"Currently, the cost of energy storage for the entire lifecycle is between 0.1 to 0.2 yuan per kilowatt-hour. Given the advancements in technology, it's merely a matter of time before this drops to 0.1 yuan," predicts Tian Qingjun.
Last year, BYD made headlines by successfully reducing the price of energy storage systems to below 1 yuan, while this year, Kelon Electronics has brought industrial energy storage costs down to approximately 0.5 yuan. While some perceive this progress merely as heightened competition within the industry, for large manufacturers, managing project costs has become a vital competitive edge.
Furthermore, leading firms are in a strategic position to categorize their offerings distinctly. By observing market dynamics, firms such as BYD, Yiwei Lithium Energy, and CATL are successfully carving out their niches within the European and American markets. In July, CATL asserted that it has carved out a remarkable 35% market share in Europe, having locked in significant orders exceeding 45GWh in markets like Italy and Australia, showcasing robust performance in energy storage.
However, the advantages of leading manufacturers extend beyond mere cost efficiency. In a recent interview with the chairman of Norway's sovereign wealth fund, CATL's head, Robin Zeng, emphasized the importance of operational capabilities as a critical determinant of market valuation. He remarked, "If someone tells you that energy storage is simple, be assured they will pay a price for this simple understanding years down the line."
Given that large-scale projects often necessitate extended timelines and multi-regional operations, consistent supplier support for maintenance becomes paramount. This reliability further solidifies the leading manufacturers' competitive edge in securing contracts.
This emphasis on dependable service, however, does not diminish the opportunities available for smaller manufacturers. Emerging markets, such as those in the Middle East and Southeast Asia, enable mid-sized firms to tailor more customizable product offerings that align closely with specific client needs.
In regions where infrastructure remains underdeveloped, such as Southeast Asia and Central Asia, there exists a pressing demand for stable electric supplies, even as the sophisticated high-voltage transmission technology seen in China remains inaccessible to them. For these regions, large-scale grid models may not hold, but tailored photovoltaic and storage systems stand as viable solutions for local communities seeking to become energy self-sufficient. A representative from a small firm indicated this adaptability, stating, "Local communities can fully accept the technology and costs associated with smaller-scale photovoltaic and storage systems."
For companies operating along the Belt and Road Initiative, firms like Huazi Technology, Telonmei, and Yilan Technology are adeptly positioning themselves and solidifying their local roots.
In the long term, conditions favoring the overseas markets hold promise. However, companies must remain vigilant against an uptick in trade barriers that may surface in the near term, as this could impact the growth of their international operations.
The dynamics of energy storage are indicative of how Chinese manufacturers are venturing into global markets. Such measures can provoke forms of trade protectionism, revealing an intricate cycle within the industry. In Europe, earlier high levels of storage project deployments resulted in increased product inventories, yet recent trends now reflect a rapid rebound in demand. Meanwhile, producers in the U.S. are hurrying to install systems before tariffs escalate in 2026, driving an unforeseen spike in order volumes.
Nevertheless, regional risks remain a concern. Recent announcements in the U.S. regarding tariffs under the 301 proposal, which may impose staged duties on solar panel assemblies and raw materials like steel and aluminum over the next three years, threaten to undermine cost advantages for Chinese enterprises.
As Wang Yu, chairman of Guoxuan High-Tech, aptly noted, "If a country suddenly hikes import duties from 7.5% to 25%, this will significantly hurt us. If Chinese firms are entirely excluded from the U.S. market, prior investments could be rendered worthless."
However, abandoning potential markets due to perceived risks is not a sound business strategy. History illustrates that there are rarely immutable enemies or friends, but rather opportunities can lie in shared interests. Cooperation provides favorable pathways to navigate through uncertainties, embodying the strategic maneuverability inherent to Chinese manufacturers.
The approach to extend domestic capacity overseas manifests in two principal strategies: establishing localized factories or leveraging existing ones in distant markets. For instance, Yiwei Lithium Energy has embarked on extensive projects across four regions—Mississippi in the U.S., Hungary, Malaysia, and Turkey—poised to serve the U.S. market while reinforcing their strategic positioning across international borders.
Thanks to this overseas initiative, Yiwei has transitioned from a second-tier player in the field of power batteries toward a frontrunner in energy storage solutions. InfoLink indicates that during the first half of 2024, Yiwei’s shipments in energy storage cells are projected to put them firmly in the second position globally.
In fact, Yiwei’s energy storage battery output in the first half of the year has dramatically eclipsed that for power batteries, leading to a rise in revenue from energy storage by 9.93% compared to the previous year, while revenue from power batteries saw a drop of 25.79%. Notably, overseas demand constituted a remarkable 60-70% of the overall demand, demonstrating the significance of these markets.
Similarly, CATL is building its international credentials. Since the inauguration of its first overseas plant in Germany in 2023, they have expanded across multiple countries, including the U.S., Hungary, Indonesia, Thailand, Spain, and Morocco, establishing an impressive presence that encompasses both energy storage batteries and power batteries.
The effective overseas expansion has further bolstered CATL's financial health. By the first half of 2024, the gross margin for its overseas markets reached an impressive 29.65%, reflecting an 8.16 percentage point improvement compared to the previous year, contributing to a total gross margin growth of approximately 7 percentage points in the energy storage sector.
Another aspect of this dynamic is the establishment of deep-rooted partnerships with overseas distributors and proprietors, creating conducive conditions for scaling international sales. For instance, Zhaoyang Energy recently signed a collaboration agreement with Ahlsell, the largest industrial retailer in the Nordic region, facilitating a strong foothold in that local market.
Additionally, on July 15th, Sungrow sealed one of the world’s largest energy storage projects in partnership with AlGihaz, a Saudi Arabian energy firm. With a total capacity of 7.8GWh, Sungrow has emerged as a leader in securing overseas contracts within the energy storage space. Its first half revenue reflected a year-on-year increase of 8.38% to 31.02 billion yuan, while their net profit jumped by 13.89% to 4.959 billion. This translates to empirical growth as energy storage remains one of their most lucrative divisions, showcasing a substantial gross margin hike of 12.61 percentage points, reaching 40.08%.
In summary, the current wave of international expansion is poised to significantly optimize growth trajectories for Chinese energy storage firms. While expansion is fundamentally interest-driven, foundations of industrial upgrading and manufacturer prowess intertwine with the global market trends fueling the ongoing evolution of this sector. These interconnected facets render a hopeful canvas for the future of Chinese energy storage.
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