US, EU making inroads into China's EV battery manufacturing dominance

China accounted for three-quarters of global investments in clean technology manufacturing in 2023, down from 85% in 2022 as investment in the US and Europe grew strongly, particularly for battery manufacturing, for which investments more than tripled in these regions, the International Energy Agency said May 6.

Building domestic clean tech manufacturing capacity is a priority of both the US' Inflation Reduction Act and the EU's Net Zero Industry Act, with US investment in EV battery making amounting to $40 billion between 2020 and the third quarter of 2023.

China accounts for more than 80% of battery manufacturing capacity, followed by the US and the EU with around 5% each, the IEA said in a new report, Advancing Clean Technology Manufacturing.

"The capacity accumulated by these three regions is expected to remain above 90% through 2030, but the share of China could fall to around 60%, as the European Union and the United States nearly triple their shares," it said.

In solar PV manufacturing, however, China is expected to retain the bulk of its 80%-plus market share through to 2030 despite advances in this sector by the US and India.

A plant-level assessment of more than 750 facilities indicated China remained the lowest-cost producer of all clean energy technologies, with battery, wind and solar PV facilities typically 20%-30% more expensive to build in India than in China, and 70%-130% more in the US and Europe.

"The vast majority of total production costs for these technologies (70% to 98%) is estimated to come from operational costs, which include inputs such as energy, labour and materials -- implying that production cost gaps seen today are not immutable and can be influenced by policy," the IEA said.

In terms of growth, a global glut in solar panel manufacturing meant average utilization in factories was down to 50%, with enough capacity available to meet projected 2030 demand.

Battery manufacturing capacity additions of 780 GWh in 2023 took total capacity to 2.5 TWh, three times current demand.

"Globally, battery manufacturing capacity could exceed 9 TWh by 2030 if all announcements are realized," the report said.

Wind and electrolyzer manufacturing also grew in 2023, but less rapidly, with existing wind manufacturing capacity seen at 50% of net-zero emission scenario needs in 2030.

Heat pump manufacturing slowed due to stagnation in most leading markets, existing capacity seen delivering only around one-third of 2030 needs under the IEA's NZE Scenario.

"This could change quickly given the short lead times typical of capacity expansions in this industry," the IEA said, noting that "40% of investments in clean energy manufacturing in 2023 were in facilities that are due to come online in 2024."

Platts, part of S&P Global Commodity Insights, assessed the price of lithium carbonate, a key commodity in EV battery manufacturing, at $14,600/mt May 6 (CIF North Asia). That compares with $34,000/mt a year ago, down 57%.