SHANGHAI, Oct. 16 (SMM) – China’s lead-acid battery industry has been reported as “out of control” recently since battery giants, including Tianneng Power and Chaowei Power, have been aggressive in expansion which leaves severe overcapacity. Thus, the price wars among battery giants hurt SMEs hard. Nevertheless, SMM believes the comment is a bit biased.
It is known that high concentration is an inevitable trend for industry development. China has endeavored to renovate lead-acid battery industry, shutting down over 80% of battery producers. As such, larger enterprises are actively expanding capacity to compete for market shares left by the closed enterprises, contributing to higher concentration of battery industry, which is expected by the central government.
Since production and processing of lead-acid battery easily cause pollution, safe and clean production requires high-end facilities and completed environmental protection measures. This often poses large cost pressures on SMEs. In this context, highly concentrated development of battery industry is a necessity for realizing China’s goal of scientific and sustainable development.
Lead-acid batteries, as renewable energy product, enjoy numerous advantages including safety, low costs, and wide applications. Xu Hong, Secretary to Lead-Acid Battery Branch of China Electrical Equipment Industry Association, explained that three key points should be highlighted in terms of lead-acid battery demand.
First is the demand for automobiles. Automobile demand is expected to hit 45 billion vehicles during the 12th Five Year Plan period.
Second, China’s electric vehicle sector is progressing rapidly and has been a major force for growth of lead-acid battery industry for the past ten years.
Finally, the development of all-electric cars will provide new opportunities for battery industry.
The overall demand for lead-acid batteries should still be strong, and the temporary weakness and oversupply are mainly attributed to China’s economic slowdown.
Some reports revealed that China’s lead-acid battery industry was mired in unprofitable businesses given the intensifying overcapacity and price wars among leading battery enterprises. SMM holds a view that price cuts should be a market behavior, and it is understandable that these backbone enterprises lowered prices during low demand period while raise prices when demand increases.
Wang Jingzhong, Vice President to the China Battery Industry Association, revealed that the consolidation of lead-acid battery industry should continue, and the number of battery producers will contract to 300. Besides, the market shares spared by the closed enterprises will continue to prompt large battery producers to expand.