Once considered a coveted asset, the lithium battery sector now resembles a hot potato, with companies retreating amid intensifying competitionBeginning in 2024, a multitude of organizations, including Hive Energy and Yicheng New Energy (300080.SZ), announced plans to halt expansions and new projects encompassing critical links in the lithium battery supply chainAccording to incomplete statistics from reporters, the total investment of lithium projects that have been postponed, suspended, or terminated since 2024 amounts to hundreds of billions of yuan.

At the same time, a fierce price war is unfolding in the lithium battery market, with projections stretching into 2025. Mo Ke, the founder of True Lithium Research Institute, expressed to reporters that the lithium battery sector will gradually evolve from a "race for capacity" to a "race for products," ultimately achieving a new balance of supply and demand.

High Industrial Research Institute (GGII) predicts a significant reduction in the number of power battery companies from over 50 to below 30 within the next three years.

The decline in investment levels indicates a significant shiftAs key players in the lithium battery supply chain, the new energy vehicle and energy storage markets experienced growth in 2024.

Statistics from the China Association of Automobile Manufacturers reveal that in 2024, China’s production and sales of new energy vehicles reached 12.888 million and 12.866 million respectively, marking year-on-year increases of 34.4% and 35.5%. Furthermore, based on data from the Zhongguancun Energy Storage Industry Technology Alliance, by the end of 2024, the cumulative installed capacity of power storage in China is expected to exceed 100GW for the first time, reaching 137.9GWIn stark contrast, the scale of new energy storage installations will surpass that of pumped hydro storage for the first time, with an installed capacity of 78.3GW and an energy storage capacity of 184.2GWh.

Despite the upward trajectory in both growing markets, the competitive pressure within the lithium battery industry is intensifying, resulting in declining investments

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GGII’s incomplete statistics show that the total planned investments in lithium batteries and primary materials, sodium batteries and their electrodes, and solid-state batteries for 2024 amount to approximately 496 billion yuan, a staggering 64% decrease compared to the previous year.

In 2024, around 60 new planned lithium battery projects (including announcements, contracts, and construction) were reported, down 37% from 2023. The planned production capacity is about 590GWh, nearly a 60% decrease from 2023 levelsBased on announced investment amounts, the total planned investments in lithium batteries for 2024 are over 180 billion yuan, which is a 68% reduction from 2023.

The decline in investments in the lithium battery market has ripple effects, impacting upstream sectors as wellThe planned investments for lithium battery cathodes, anodes, electrolytes, separators, and copper foil projects in China for 2024 amount to 136 billion yuanThe most significant drops in planned investment are observed in copper foil and electrolyte projects, which have both seen declines exceeding 90%.

Moreover, the 2024 plans for solid-state batteries include approximately 33 new projects, with a planned capacity of about 138GWh and total planned investments of approximately 74.5 billion yuan, reflecting a 35% reduction compared to the previous year, which is less severe than the decline seen in lithium batteries.

This trend is likely to extend into 2025. GGII anticipates that power battery enterprises will continue to take a cautious approach to expansion in 2025, with expectations of a new wave of expansion cycles emerging in 2026. By 2027, sodium batteries are expected to accelerate towards industrialization (with shipments exceeding 10GWh), and all-solid-state batteries may commence small-scale production.

According to the Zhongguancun Energy Storage Industry Technology Alliance, the bidding prices for energy storage saw a decline lesser than that of 2023. From the perspective of the price drop, the room for further declines in energy storage prices is now quite limited

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However, prices are still expected to descend in 2025 due to ongoing market competitionThe anticipated reshuffling of the industry in 2024 has not proceeded as quickly as initially expected, thus the price war is projected to continue for a while longer.

Mo Ke remarked, “Our lithium production capacity is targeted for the global marketHowever, the current international circumstances seem to contradict our assumptions, leading to intensified domestic competition in the lithium sectorThis necessitates greater absorption of production capacity in the domestic market, but the local absorption capability is insufficient to sustain such a large scale.”

A new set of regulations has made it clear that companies must allocate no less than 3% of their primary business income for research and development and process improvements annuallyIn addition, companies are now required to ensure that their reported production in the previous year meets or exceeds 50% of their actual production capacity for that year.

As market competition intensified in 2024, several lithium projects suddenly changed their investment plans.

In May 2024, Yicheng New Energy announced that, in light of its development status and strategic planning, it would terminate its plans to issue stocks to specific investors and requested the Shenzhen Stock Exchange to withdraw relevant application documents.

As per the original plan, Yicheng New Energy intended to raise no more than 2.5 billion yuan to fund four projects related to lithium-ion batteries and photovoltaics and bolster its working capitalAmong these, the lithium battery-related projects included the second phase of research and production for lithium-ion battery anode materials and a project to produce 30,000 tons of high-performance lithium-ion battery anode materials, earmarked for an investment of 1.4 billion yuanCompletion of these projects would have led to an additional annual capacity of 60,000 tons for Yicheng New Energy's lithium-ion battery anode materials.

Simultaneously, several companies, initially optimistic about the future of lithium battery development, also opted to terminate new project submissions in 2024.

In March 2024, Kexiang Co. (300903.SZ) issued a statement indicating that, following amicable negotiations with the government of Xinfeng County, it was deciding to terminate the investment intention contract for the new 6GWh sodium-ion new energy battery project

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Previously, Kexiang planned to invest 2 billion yuan to establish an industrial park for sodium-ion batteries and materials.

Additionally, several overseas capacity expansions faced challenges in 2024. In October 2024, Hive Energy declared that due to uncontrollable factors, the development of the European electric vehicle market had not met expectations, forcing the company to make the difficult decision to cease operations of Hive Energy Technology (Europe) Co., Ltd. and its German subsidiary, effective January 31, 2025.

Throughout 2024, numerous companies have reported announcements regarding the postponement, suspension, or termination of lithium battery projects, with affected investment totalling several hundred billion yuan.

Insights from the High Industrial Lithium Battery Research indicate that the current lithium battery sector is undergoing a significant adjustment phase, cautioning that indiscriminate expansion during a downturn could hinder risk management for businessesCompanies should now focus more on improving product quality and enhancing R&D for new technologies, shifting from external growth to internal developmentFor regional development, it is crucial to engage with leading enterprises or chain enterprises capable of synergizing with local industries during this period of deep transformation, positioning themselves favorably for the next prosperous economic cycle.

Mo Ke emphasized that without a technological advantage, any new capacity—even when operational—could face the embarrassment of being outmoded quickly. “In this competitive landscape of domestic lithium enterprises, newly added capacity is stabilizing, while the ‘value’ of capacity is continuously increasing, particularly in terms of product performance standardsIf companies do not innovate technologically, existing capacities will gradually become obsolete within 5-6 years, leading to a scenario where capacity becomes increasingly aligned with market demand.”

Observation reveals that many of the production halt announcements are coming from secondary and tertiary enterprises, while leading companies like CATL (300750.SZ) are defying the trend

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