Just how much battery is needed by China alone?

This is a question I ponder as we are barraged weekly by comments that China has an overcapacity in batteries. I think the first question that needs to be answered is how much batteries is needed by the Chinese market alone.

For this, I’m simply looking into auto and energy storage batteries. For auto batteries, I think it’s worth looking at commercial and passenger vehicles separately. Currently, we are seeing demand for about 30 million passenger vehicles out of Chinese auto makers. 80% of that is for domestic consumption and 20% of that is for overseas market. Let’s say that over the next 10 years, we will get to 95% NEVs for cars produced by Chinese auto industry. Out of those 95%, 60% are BEVs and 35% are PHEVs. If the average battery pack on PHEVs is 20 kWh (a lot of compact sedans at 10k Wh) and the average battery pack of BEV is around 60 kWh, then the battery requirement from passenger vehicles are:

30m * 60% * 60 kWh + 30m * 35% * 20 kWh = 1080 GWh + 210 GWh

So roughly around 1.3 TWh from just for the almost full electrification of the Passenger Vehicle market.

CABIA November report show that 87.8 GWh of auto battery was sold in that month alone with 692 GWh sold for the full year. Of which, 115.8 GWh has been exported.

So just in Domestic auto market alone, we are at > 600 GWh of battery installation just for the passenger and commercial vehicles for the full year.

According to CPCA, we had 10.73m NEVs produced up to November (counting both exports and domestic retail). Of which, > 60% were BEVs. This is with NEVs representing over 45% of the sales overall.

Going from 27% BEV & 18% PHEV to 60% BEV & 35% PHEV + doing this across domestic sales as well as exports + slightly larger battery packs (due to lower battery px and availability of SSB for large vehicles) is what will get us to 1.3 TWh of battery demand or even higher than that.

Beyond Passenger market, commercial vehicles market is also electrifying very quickly. In November, NEV Heavy Duty Trucks (HDT) penetration reached 17.6% with sales crossing 10000 for the first time. This ratio has really picked up and increased in the recent months. As battery cost, charging speed, charging infrastructure and battery charge cycle continue to improve, the superior economics of electric HDTs is leading to rapid electrification of this sector. China sells as many 1 million HDTs a year (can be even more than 1 million when including exports). Battery pack sizes for non-swapping trucks are going above 500kWh per truck now. For swappable ones, you are still looking at 400kWh, but more of them are needed in the swapping stations. As such, battery demand for HDTs alone will be around 600 GWh.

And then there is the light and micro truck market. Light truck is a light easier for me to figure out. Each light truck requires 90 to 140 kWh battery pack (for 275 to > 400 km range that’s needed for logistics inside a city per day). As battery cost continue to improve, I think we will see more of the > 100 kWh packs like the 132 kWh T5EV version that BYD added recently. Going forward, I think 100 kWh per light truck (4.5 to 6t) is quite reasonable. In 2023, we had at least 1.4 million light truck sales that are ICE or NEVs .If we assume 1.5 million light Trucks are produced by Chinese automakers in a normal year, then 1.5m * 100 = 150 GWh for light trucks

Beyond that, there are also buses, coach pickups and micro trucks. For example, all light commercial vehicles (probably include < 4.5t trucks and vans) were 2.5 times that of light trucks this year. It would be very surprising to me if we don’t require around 1 TWh of battery to electrify all the commercial vehicles.

There are also construction machineries, agricultural machineries, AGVs, mining equipment, engineering equipment, battery electric ships, battery electric rail (like BYD’s ky rail).

2.5TWh for the entire transportation sector in China seem quite reasonable even if we don’t see further growth in China’s auto market.

The next question is just how much battery is needed for energy storage system in grid, large solar/wind farms, industrial and home. In 2023, China consumed about 9000 TWh in electricity. There are 8760 hours each year. So on average, China’s grid was consuming a little over 1TW. Since China’s grid continues to grow at about 6 to 7% currently even in an economic slowdown, it would be hard for me to see how we don’t get to 2 TW of average power consumption by 2040.

If we want to reach a grid that is around 90% renewable by then, we would probably need something like 40% solar, 30% wind, 10% hydro, 10% nuclear and NG/ammonia/hydrogen for the remainder as backup power. 40% solar would mean that solar power needs on average to provide 800GW to the grid. But since solar is not available for 12 hours a day on the darkest days of the year (I’m factoring in China’s 3+ hour of geographic span with this), it would reason that whatever excessive solar was generated in 12 hours of operation will need to cover the 12 hours where no solar is generated. All of this will need to be stored in battery. Assuming of course that wind, hydro and nuclear do not need more battery (seasonal variabilities can be covered by thermal plant burning NG, ammonia and hydrogen). 12 * 800 GW is around 10 TWh. So, 10 TWh of BESS is needed to get the grid through the night in most cases.

What is the service life of batteries? I’ve typically seen 6 to 8 years of auto batteries. It is possible that since fast charging is not needed for BESS, the charge cycle and service life of BESS will be longer. If we use 10 year life cycle, then BESS will need about 1 TWh of battery production per year. If we use 7 year life cycle, then we will need about 1.5TWh of battery production per year.

If we add all of this together, up to 4 TWh of battery production is needed just for the Chinese market.. And this is without factoring in battery consumption in 3C sectors or possible new electrification that may further drive up demand. For example, if we suddenly see millions of humanoid robots produced every year and each robot need 10 kWh battery pack, then demand for batteries will change quite noticeably.

Bottom line is that we cannot complete energy transition without a dramatic growth in battery production.