The rapid growth of electric vehicles (EVs) and energy storage systems has intensified the short supply of lithium batteries, while battery materials prices are being further pushed up by manufacturers' overbooking of materials, according to Chinese media reports.
The EV market has braced for battery shortages in 2022, estimating the shortages could be as impactful as automotive chip shortages in 2021, industry sources said.
The industry is growing so fast that upstream materials suppliers cannot meet rising demand, causing materials prices to rise above acceptable levels, the sources said, adding some suppliers have even urged the Chinese government to intervene and stabilize the prices.
To avoid control by Tier 1 suppliers, carmakers in 2022 have changed their procurement strategies, according to the Chinese media reports.
Battery makers are actively expanding production capacities, and they have placed one to three times more than usual orders to materials suppliers. Materials suppliers are coming under the most pressure in the supply chain, followed by suppliers of minerals and equipment, the reports said.
Nonetheless, lithium battery and mineral prices are unlikely to rise as fast as materials prices but will go up steadily amid market fluctuations, the industry sources said, citing the effects of policy incentives and penalties as curbs.
The readiness of EV chargers is another issue. The ratio of EVs and charging piles in China remains at 3:1, and the growth of EVs still outpaces that of chargers. Even if the latter's number picks up, whether there will be sufficient and stable electricity supply to power the chargers is questionable.
The battery supply chain is under multiple pressures. If terminal demand slows downs, the supply end's bubbles are likely to burst. When that happens, suppliers who lack adequate financing capabilities, balanced clientele, and competitive edges might be unable to afford price cuts or adapt to market tremors.
Lithium carbonate supply in China, March-April 2022 (ton)
Source: SMM, compiled by DIGITIMES, May 2022