With the rapid growth in the penetration rate of new energy vehicles, the development of the industrial chain, and effective control of the pandemic, China's installed capacity of power batteries has surged. Over the past five years, China's automotive industry chain has undergone earth-shaking changes, with both new energy vehicle sales and installed capacity of power batteries increasing by more than four times. In 2022, China sold approximately 6.88 million new energy vehicles, with a penetration rate of about 25%, achieving the national target ahead of schedule. As a result, the power battery market has benefited, with an installed capacity of 295 GWh in 2022. China has leaped to become the world's largest producer and exporter of new energy vehicles and power batteries.
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China's Installed Capacity of Power Batteries
China's annual installed capacity of power batteries has doubled for three consecutive years, showing strong momentum
Since the first time China's new energy vehicle sales exceeded 1 million in 2018, the development of China's new energy vehicle industry has entered a fast lane, especially in 2021 when it entered a period of explosive growth. The penetration rate of new energy vehicles rapidly climbed from 5% in 2020 to 25% in 2022, achieving the government's 2025 planning target ahead of schedule. Benefiting from the growth in new energy vehicle sales, power batteries, as an essential core component of new energy vehicles, have continuously set new records in installed capacity.
In addition, technological progress in power batteries has driven an increase in battery energy density, with the average battery capacity per vehicle continuously growing, further accelerating the increase in installed capacity of power batteries. By the end of 2022, China's installed capacity of power batteries accounted for more than 55% of the global total.
Source: Frost & Sullivan analysis
Looking at the quarterly installed capacity ratio of power batteries in China, the fourth quarter is the peak season for installation
From the trend of quarterly installed capacity, the third and fourth quarters account for a relatively high proportion of the annual installed capacity, between 60%-70%. Especially in the fourth quarter, which usually accounts for 30%-40% of the annual total. This is because the sales of new energy vehicles are similar to the overall automotive sales market trend, with the third and fourth quarters being traditional peak seasons.
However, as China's automotive sales market becomes more mature, vehicle sales are no longer concentrated in the second half or fourth quarter, which also affects the sales pattern of new energy vehicles. Data from the past two years show that, except for the first quarter (affected by Spring Festival activities), the concentration of the overall installed capacity of power batteries in the second half of the year relative to the annual installed capacity is declining.
Source: Frost & Sullivan analysis
By vehicle type, China's annual installed capacity of power batteries is mainly passenger vehicles, accounting for nearly 90%
Looking at vehicle types, the development of power battery installed capacity has two distinct characteristics: the installed capacity is mainly concentrated in the passenger vehicle sector, and the growth rate of passenger vehicle installed capacity far exceeds that of commercial vehicles (buses and trucks).
Source: Frost & Sullivan analysis
The reasons are as follows: 1) The overall sales of passenger vehicles are much larger than those of commercial vehicles (buses and trucks), with new energy passenger vehicle sales reaching 23.56 million in 2022, while commercial vehicles were only 3.3 million; 2) Compared with plug-in hybrids, the proportion of pure electric passenger vehicle sales continues to increase, with the average battery capacity per pure electric vehicle usually several times that of plug-in hybrid models; 3) Currently, new energy power is more suitable for passenger vehicles, while the technical route for new energy-powered trucks is not clear, with the penetration rate of passenger vehicles far exceeding that of new energy trucks.
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Passenger Vehicle Market
China leads the world in new energy power technology and production, with a number of leading power battery companies emerging. Among the top 10 global installed capacity companies, six are Chinese local enterprises, greatly consolidating the stability of China's new energy vehicle industry chain.
At the same time, a number of new forces in new energy vehicle manufacturing have emerged in China, with emerging manufacturing concepts. Their brand image, product strength, and terminal sales have brought certain pressure to international traditional giants in the automotive industry. Against this backdrop, the installed capacity of passenger vehicle power batteries has become a core factor for the continuous growth of China's installed capacity of power batteries.
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Truck Market
In terms of trucks, the penetration rate is lower, especially for dry-line heavy trucks, which have heavy loads and long operating distances. Whether it is charging or battery swapping, current power battery technology is difficult to support their operational needs. Currently, electric heavy trucks are mainly used in enclosed scenarios such as ports and mining areas.
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Bus Market
In terms of other types of buses, especially light passenger vehicles, there is still some room for growth, but they also face challenges similar to those of new energy trucks.
By battery type, ternary lithium-ion and lithium iron phosphate are competing fiercely, with lithium iron phosphate returning to mainstream
From the perspective of power battery types, ternary lithium and lithium iron phosphate have dominated the power battery market and are unlikely to be replaced by emerging technologies in the short term. Due to government subsidy policies and energy density advantages, the proportion of ternary lithium in the overall installed capacity reached its peak during the period from 2019-2020.
However, with the popularity of A00-level electric models and the continuous improvement in power battery technology to enhance energy density, lithium iron phosphate can now cover most vehicle positioning needs. Coupled with cost advantages, the proportion of lithium iron phosphate installed capacity continued to climb during the period from 2021-2022, reaching 62% in 2022 and expected to further increase in the future. Ternary lithium batteries will mainly cover high-end models, providing additional range.
Source: Frost & Sullivan analysis
The development momentum of China's new energy vehicle industry chain is strong, and it has become one of the important participants and main drivers in the global new energy vehicle field. As one of the core components of new energy vehicles, power batteries have received high attention. Looking ahead, as the world's largest producer and exporter of power batteries, China's power battery industry will continue to maintain its leading position in innovative technology and manufacturing.
