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China's unbridled EV push wreaks havoc on battery makers
Yang Jian | 2018/7/6

SHANGHAI -- OptimumNano Energy Co., China's third-largest battery maker for electric vehicles, disclosed last week it will suspend battery cell production for six months. 

The Shenzhen-listed company, which is using less than 23 percent of its production capacity, is far from the only Chinese battery maker in trouble. 

Burdened with underused plants, dozens of EV battery suppliers have gone out of business in China since 2015. And more likely will meet the same fate down the road.

Beijing started offering generous subsidies for EVs in 2009 in the hope that domestic automakers and suppliers could become world-class players in the EV market.

EV output has increased substantially across China. Last year, production of electrified vehicles, most of which were battery EVs, jumped 54 percent to approach 800,000. 

Manufacturing capacity for EV batteries has also surged in tandem. By the end of 2017, combined annual capacity of EV battery makers in China topped 200 gigawatt-hours, double the tally a year earlier.

But only about 40 percent of the total factory capacity was used last year, according to estimates disclosed last week by ChinaEV100, a Beijing industry body whose members include a wide range of domestic EV makers, suppliers and related government agencies.

Among China¡¯s top 10 EV battery makers, only Contemporary Amperex Technology -- the largest -- had a healthy capacity utilization ratio of nearly 90 percent in 2017. BYD Co., the second-largest maker, was using only 44 percent of its plant capacity. And utilization rates for the other eight companies varied from 10 to 40 percent. 

Some 50, or one third of EV battery suppliers in China, were forced to close from 2015 to 2017, according to ChinaEV100.

The shakeout comes as the Chinese government has significantly raised technical standards on EVs as well as batteries over the past three years.   

At the beginning of the year, the minimum range for electric passenger vehicles that qualify for government subsidies was hiked to 150 kilometers (93.2 miles), up from 100 km in 2017 and 80 km in 2015.

The government has also raised the threshold on energy density of batteries in EVs eligible for subsidies to 105 watt-hours per kilogram from 90 watt-hours previously. 

Like OptimumNano, the majority of EV battery suppliers in China mainly produce lithium ion phosphate batteries, which are cheaper and also lower in energy density compared with other types of batteries used in EVs.

The government¡¯s rising technical standards require EV battery makers to quickly switch production to more powerful batteries.

But that¡¯s something only a few suppliers can pull off because battery production is both capital intensive and technologically complicated. 

EV battery makers will continue to grapple with unwanted capacity and more of them will succumb over the next two years, ChinaEV100 predicted.

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