The Li-ion battery market for EVs in China is expected to grow at a CAGR of 38.5 percent during the 2015-2019 forecast period.
Technavio analysts have identified several key factors helping to promote this healthy market growth:
China is witnessing tremendous growth in Li-ion battery sales for EVs
The automotive sector in China is expected to grow rapidly with the increased use of Li-ion batteries for EVs because of the growing environmental concerns and aggressive government EV targets. There are more than 400 Li-ion battery manufacturers in the country.
The country’s economy came out strongly during the recession by appreciating its currency against the US dollar by more than 20% in 2008. The reason for sustainable growth during 2008-2009 was because of reduced imports; China’s total production was mostly consumed internally. The country has become a large economic powerhouse, fuelled by its growing middle-class population. Along with increases in income and spending power, the middle-class segment offers many business opportunities.
Moreover, the country has a large population of HNWIs, which is expected to drive the growth of the Li-ion battery market for EVs. Also, if we compare the growth of EVs from 2011 to 2014, there was more than 700% growth registered in the country.
Li-ion battery cost to reduce drastically by 2020
The cost of EVs is still considerably more when compared to other vehicle types because of the expensive Li-ion battery. Battery cost is mainly dependent on material cost and production volume. The cost of a Li-ion battery has been falling since 2010 as a result of production exceeding demand.
With significant current Li-ion battery production capacity and upcoming capacity, both nationally and globally, there are indications that there may be an oversupply of Li-ion batteries in the near term.
Significant cost reductions in Li-ion battery packs have been achieved in the last few years. According to the US Department of Energy, battery costs fell from $1,000/kWh in 2008 to $485/kWh in 2012. Expectations are that battery costs will continue to fall during the forecast period.
China promotes EVs to curb growing oil imports and climate change issue
China was the largest oil importer and also the largest carbon emitter globally in 2014. The country plans to curb the gasoline imports and CO2 emissions by 2020. In response to growing oil imports and environmental concerns, the government is adopting a wide range of policies such as promoting Li-ion battery-operated green vehicles.
The country has initiated the Ten City One Thousand Cars plan, which aims at increasing the adoption of EVs in China. This initiative was started initially in five major cities and was planned to expand to more than 25 cities in the country by 2014. The Chinese government has mandated the use of EVs in state purchases by around 30% of the overall EVs sales in China and will provide 10% rebate in purchase tax.
In addition, consumers in Beijing can avail themselves of around $18,500 rebate on the market price of EVs. The government support and initiatives are expected to increase the market growth for EVs in China. Moreover, gasoline consumption in China grew from 0.9 million bbl/d in 2003 to more than 2 million bbl/d in 2013.
The increase in vehicle demand has triggered the oil demand and has forced the government to import more gasoline from other countries. Currently, the country has been importing more than half of its gasoline needs.
