The Visual Capitalist recently published outstanding analysis of the 2021 battery storage manufacturing landscape: Ranked: The World’s Top 10 EV Battery Manufacturers (visualcapitalist.com).

The key takeaway is that the market as currently constituted is enormously concentrated in the hands of a small number of exclusively Asian players:

  • 100% of the top 10 manufacturers are based in Asia, and between them control a whopping 94% of global market share
  • 70% of the manufacturing output is controlled by three companies: CATL (China, 33%), LG (South Korea, 22%) and Panasonic (Japan, 15%)
  • The top four Chinese players alone control a massive 43% of global market share

The Chinese domination of the hardware landscape points to a continued downward trend in the costs of battery storage, a critical element to making renewables and electric vehicles viable to the end consumer.

However, it also raises important questions concerning the future business models for non-Chinese battery manufacturers. In other spaces where similar Chinese domination of hardware production has taken root (e.g. drones), inevitably margins are squeezed for the remaining non-Chinese manufacturers.

This looming dynamic has significant implications for non-Chinese manufacturers. First, it necessitates a close partnership with national governments who have security of supply concerns and may be willing to provide economic incentives to innovative, high-value added domestic battery storage companies (e.g. U.S. DOE “Moonshot” on Long Duration Storage). Innovative U.S. and European battery storage companies have also been able to successfully access the deep pools of private capital which are increasingly attuned to the enormous opportunities generated by the Global Energy Transition.

Second, continuing along the theme of differentiating along technological grounds, it will necessitate close partnerships with providers of sophisticated software solutions to attract and maintain market share. Over the long run, such close partnerships will allow non-Chinese manufacturers to ensure higher and more durable margins, even as Chinese manufacturers continue to put intense pressure on hardware margins.