The global battery industry is currently experiencing a boom, with production capacity far exceeding demand. Chinese manufacturers, in particular, are driving this surge in capacity, even as demand for electric vehicles (EVs) and energy storage slows down. This imbalance between supply and demand has led to an oversupply of batteries in the market.
According to S&P Mobility data cited by Nikkei, global EV battery production capacity is expected to reach 3,930 gigawatt hours this year, while demand is only projected to be 1,161 GWh. This overcapacity is largely attributed to Chinese manufacturers like Contemporary Amperex Technology Limited (CATL) and BYD, who are leading the production surge.
The oversupply of batteries has prompted battery makers to delay or cancel projects. For instance, Panasonic’s new plant in Kansas is not expected to reach peak output until 2027, due in part to weakening demand from Tesla, its main customer. Similarly, LG Energy Solution has slowed down the construction of its battery plant in Michigan.
In response to the oversupply, some battery manufacturers are shifting their focus to producing lithium-iron phosphate (LFP) batteries for grid-scale utility storage. These large-scale batteries are designed to support transmission grids and AI data centers. However, questions remain about the fate of the excess batteries, including how they will age over time and what impact their idle status will have on capacity fade concerns.
On the tariff front, Japanese automakers have started passing on the costs of U.S. tariffs to American consumers, with Toyota raising prices in July. Additionally, the European Union and the U.S. are working on a deal to reduce tariffs on European car imports from 27.5% to 15%, in exchange for the EU dropping tariffs on certain U.S. industrial goods.
As the industry grapples with the challenges of oversupply and tariff uncertainties, it remains to be seen how battery manufacturers and automakers will navigate these changing dynamics in the global market.