Global Battery Investment Declines as China’s Growth Slows Amid EV Market Shifts

This year marks a significant shift in global battery investments, with a notable decline projected following four years of substantial growth. According to Rystad Energy research, the downturn is largely driven by a reduction in battery infrastructure investments within mainland China.

This slowdown is attributed to the country’s current phase of development characterized by policy changes, increased electric vehicle (EV) adoption, supply shortages, rising raw material costs, and rapid capacity expansion. As China adjusts to these factors, the global battery investment landscape is experiencing its first downturn since 2020.

China has historically been a leader in lithium-ion battery (LIB) development due to its early adoption of large-scale projects and rapid production growth. This growth, which surged over 40% annually in 2021 and 2022, has started to decelerate as the industry matures and achieves self-sufficiency in battery supply.

With a focus shifting towards Europe and the US, China is positioning itself strategically as major manufacturers in these regions transition from planning to production stages. Despite this, Europe and the US still face challenges in developing robust battery infrastructure.

In Europe, a decline in EV market demand has impacted investment in battery infrastructure. This downturn has led to potential delays and cancellations of EV projects, which is problematic given the sector’s dependence on lithium-ion batteries.

Financial instability among original equipment manufacturers (OEMs) and the influence of high energy costs, labor expenses, and bureaucratic obstacles are also significant barriers. The challenges are evident in the financial reports of global OEMs, including Chinese manufacturers struggling with profitability.

The US, on the other hand, has experienced a surge in lithium demand driven by concerns over supply chain security. Efforts to increase LIB production are underway, but the US and Europe continue to grapple with developing industrial infrastructure.

Both regions are working to reduce their dependence on Chinese supply chains through policy measures aimed at enhancing energy security. Given China’s stronghold over key resources, its dominance in battery investment and lithium trade is likely to remain influential in the near future.

China’s battery industry is undergoing a consolidation phase as companies aim to produce higher-quality products amidst a slowdown in demand. Although investment in LIB capacity expansion has been robust, some firms, especially those from non-traditional sectors, are exiting the market due to competitive pressures.

Technological innovation is emerging as a critical factor for future development, with advancements such as lithium iron phosphate (LFP) batteries and new materials like composite copper foil and silicon-based anodes gaining traction. This focus on innovation reflects a broader trend towards enhancing efficiency and reducing costs in the evolving battery sector.