Overcapacity and market competition play significant roles in influencing lithium-ion battery prices, contributing to their decline in recent years.
Overcapacity
- Manufacturing Capacity Surplus: The global lithium-ion battery manufacturing capacity has grown significantly, with over 3.1 terawatt-hours of fully commissioned capacity, which is more than double the annual demand for lithium-ion batteries in 2024. This surplus production capacity has led to an oversupply situation.
- Pressure on Margins: The resulting oversupply puts pressure on battery manufacturers to reduce prices to remain competitive in the market. This situation often squeezes profit margins, particularly for smaller manufacturers.
- Lower Demand Growth: While demand continues to grow, the slowdown in electric vehicle (EV) market growth and changes in demand patterns contribute to the overcapacity effects.
Market Competition
- Increased Competition: The presence of many competing battery manufacturers worldwide, especially in regions like China, intensifies market competition. Smaller manufacturers must lower prices to compete for market share.
- Price War: The competitive landscape leads to a price war among producers. Companies are compelled to lower their prices to maintain market share, which results in a decrease in overall battery prices.
- Adoption of Low-Cost Technologies: The competition also drives the adoption of more cost-effective technologies, such as lithium-iron-phosphate (LFP) batteries, which are less expensive than Nickel Manganese Cobalt (NMC) batteries.
In summary, overcapacity and market competition are key factors driving down lithium-ion battery prices by increasing supply, reducing profit margins, and promoting the use of lower-cost technologies.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-overcapacity-and-market-competition-influence-lithium-ion-battery-prices/
