Unpacking China’s cheap battery costs

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Oct 10, 2024

James Frith, Principal at Volta Energy Technologies and former energy storage researcher at Bloomberg NEF, delves into the reasons behind China's dominance in the battery market. He explains how precision in manufacturing, seamless supplier access, and aggressive pricing contribute to their low costs. The discussion tackles potential market consolidation in China due to overcapacity and soft demand. Frith also suggests how Western companies can learn from these practices and highlights the potential for fruitful partnerships between Chinese and Western firms in battery innovation.

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INSIGHT

China's Cheap Batteries

Lithium-ion battery cells and packs from China have become incredibly cheap.
Bloomberg NEF reported LFP cells selling for $53/kWh, raising concerns about Western competitiveness.

INSIGHT

Spot Market Dynamics

The spot market for LFP cells in China is relatively thin, primarily impacting stationary storage.
EV battery pricing relies on long-term contracts, less affected by spot fluctuations.

INSIGHT

Storage vs. EV Price Sensitivity

Stationary storage experiences faster cost benefits from price crashes compared to EVs.
This is due to long-term contracts and model cycles in the EV industry.

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Chinese battery companies are manufacturing the cheapest cells in the world right now, and it’s not just because of cheap labor and state subsidies. They’ve streamlined the process in a way that has industry experts wondering how international competitors can ever catch up.

In this episode, Shayle talks to James Frith, principal at the battery investment firm Volta Energy Technologies. He argues that there are multiple factors behind Chinese manufacturers’ efficiency and speed, like the know-how to operate plants with high yields, easy access to suppliers, and ability to squeeze margins to near zero. Shayle and James cover topics like:

The confluence of overcapacity, softening demand, and low commodity prices that could result in a “bloodbath” of market consolidation in China
Why the low cell prices on the spot market hit stationary storage harder than EVs
Cost drivers of cell manufacturing, like labor, power, and environmental regulations
What Western companies can learn from China’s cheap prices
Why James is bullish on partnerships between Chinese and Western companies

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