China’s domestic lithium-ion battery market consists of five main products, segmented by cathode chemistry.
These are Lithium- Cobalt, Lithium-Magnesium, Lithium-Iron Phosphate, Lithium-Ion Polymer, and Lithium-Nickel Cobalt Manganese Oxide. This target market is valued at approximately RMB 10.7 Bn as of year end 2009, growing by around 13% in that year. The market is expected grow by a CAGR of 17% through 2015 – with some variation by product.
Marginal growth in the market had slowed over 2009 on the slump in the export market (batteries are sold to exporters), experiencing an estimated 1-2% drop in growth from year end 2008. However China’s domestic recovery is expected to bring a return to these growth rates within the next 18 months.
Around 95% of all revenues in the domestic market are reported by domestic companies. Among these, the market leaders are BAK, BYD and Henan Huanyu.
End-user Applications. Lithium-ion batteries are predominately used in mobile phones, laptops and electric tools. Recently, markets for digital products and electric bikes have become prominent. The market for electric cars is currently half the size of the average of other markets, but is anecdotally expected to grow considerably in the near term.
Export Market. Over 80% of suppliers in China export and exports are estimated at around 55% of total Li-ion battery revenues. The export market has declined considerably since the global economic slowdown of 2008-2010. This applies both to direct sales of Li-ion batteries and to products powered by Li-ion that are exported. Suppliers are adjusting to the prospect of a larger domestic market. To this end, R&D for electric vehicles, particularly bikes is underway.
Channel players. Channel players do not play a large role in this market, with around 5% of sales revenues derived from distributor or agent sales. OEMs play a more significant role in the market, accounting for around 75% of all sales. This group is classed as customer for this study.
Pricing. Most suppliers in this market expect prices to fall by up to 5% in the near future. This is mainly due to spare productive capacity and the increasing of productive scale, and more suppliers are entering the market. It is believed that Li-FePO4 will decline from its current price of RMB 11 due to greater commercialization.
Entry is feasible for a supplier with a technological solution to the above demand trends. The automotive market is particularly receptive to a solution with the density of Li-ion, the cost of lead-acid and the safety of NiMH. Lithium chloride supply is problematic as a major supplier is also the raw material producer. Competing on scale is a key challenge for entrants.
Raw Materials Costs. Lithium is a net imported commodity in China and its supply ownership is highly concentrated. Main deposits are found in South America and Australia. Bolivia, which has nationalized some of its mines, is the largest source of lithium and may cease to use the market pricing mechanism.
Regulators determine the standardization of batteries, which is based on ISO standards, and the products they power. Deregulation of electric bikes has seen a potentially large market for Li-ion created. Rules to incentivize greater battery adoption in road use is planned and is expected to be influential.