Global Electric Vehicle Battery Supply and Demand Imbalance: Supply May Exceed Demand by More Than Three Times

Autonews reported by Nikkei: A survey found that due to a cooling demand for electric vehicles, the global supply of electric vehicle batteries is expected to exceed three times the demand, leading to obstacles for countries like Japan and the United States in establishing domestic production measures.

Based on data from S&P Global Mobility, Nikkei reported that the total annual production capacity of electric vehicle battery production facilities is expected to reach 3,930 GWh, while the demand is expected to be 1,161 GWh.

By 2026, the supply of electric vehicle batteries is expected to remain at least three times the demand, and by 2030, it will still exceed twice the demand. As the world's largest market, China has yet to disclose the capacity of some production facilities under construction, which means the supply-demand gap may further widen.

Chinese-made electric vehicle batteries account for about 70% of the global total. According to market research by Korean firm SNE Research, in the top ten electric vehicle battery installation volume globally in the first half of this year, CATL led the way, followed closely by BYD. Although Korea and Japan once dominated the market, LG Energy Solutions and Panasonic have fallen to third and sixth place respectively, with continually shrinking market shares.

Countries like the United States and Japan have been encouraging companies to build battery factories domestically to avoid relying on China, but this strategy is backfiring due to an unexpectedly steep decline in electric vehicle demand.

In North America, the surplus of electric vehicle batteries is particularly severe. This year, the supply of electric vehicle batteries in the region is expected to reach 4.8 times the demand, and by 2028, the gap is expected to remain above four times.

During Joe Biden's presidency, the Inflation Reduction Act provided incentives for electric vehicles manufactured in North America, significantly increasing investment in the battery sector. However, the current President, Donald Trump, is rolling back these measures, and with the overall sluggish electric vehicle market, companies are beginning to reassess their investment plans.

Panasonic launched a battery factory in the United States in July this year, but delayed the plan for full production by the end of fiscal 2026 due to concerns about the risks of expanding capacity too early as its core customer Tesla's profits declined. Korean major battery manufacturers, who initially planned to invest heavily in the United States, are also rethinking their investment plans due to profit drops.

With the slowdown in the electric vehicle market, automakers are also cutting back on investment. Toyota has delayed the construction of a proposed battery factory in Japan, while Honda has postponed its electric vehicle and battery facility plans in Canada by two years.

As existing customer orders decline, battery manufacturers are scrambling to find buyers. Panasonic plans to sell more batteries to emerging electric vehicle manufacturers. Additionally, Swedish battery maker Northvolt filed for bankruptcy protection in Sweden in March this year.

Since the cooling of electric vehicle sales in 2024, the surplus of battery supply has become increasingly evident. According to data from Goldman Sachs, the average price of electric vehicle batteries last year was $111 per kWh, a 26% drop from 2023; meanwhile, Goldman Sachs predicts that by the end of 2026, the average price of electric vehicle batteries may drop to around $80 per kWh.

Nevertheless, thanks to the steady domestic demand and the increasing reliance of European carmakers on Chinese company batteries, Chinese companies continue to increase investment. CATL is expanding its investment in Europe, while BYD is increasing the production of low-cost batteries.

These trends might eventually widen the gap in capacity and technical capabilities between Chinese battery manufacturers and their counterparts in other regions; if the electric vehicle market heats up in the future, car manufacturers may even find themselves forced to rely on China for this critical component.

The slowing investment by battery manufacturers could have a domino effect on the supply chain. The International Energy Agency has warned that if there is a decline in investment in resources like lithium and nickel, there might be a shortage of lithium and other resources by 2030.