Lithium-ion batteries are composed of four main parts: cathodes, anodes, electrolytes and separators. Chinese businesses held an 89.4% market share by volume for cathodes, 93.5% for anodes, 87.4% for separators and 85% for electrolytes, Tokyo-based Yano Research Institute reports.
The Chinese share for separators in particular grew 13.1 percentage points in two years. In contrast, the Japanese share dropped to 9.7% from 20%.
China's rise in battery materials is driven by growing EV demand at home. Over 30% of new vehicles sold in China last year were electric or plug-in hybrids.
"Roughly two-thirds of global demand for automotive batteries comes from China," Mizuho Bank researcher Tang Jin said.
Components makers in China also are looking abroad, following clients like Contemporary Amperex Technology (CATL), the world's largest automotive battery maker.
BTR New Material Group is investing a total of about $700 million into new cathode and anode production facilities in Morocco, slated to come online in 2026. The African country has large reserves of phosphate ore, a component in cathodes. BTR's new cathode plant there will have the capacity to equip around 500,000 EVs annually, and is expected to supply Chinese battery factories in the U.S. and Europe.
Separator supplier Shenzhen Senior Technology Material last year began building a roughly $700 million plant in Malaysia. In April, it signed a supply contract with South Korean battery maker Samsung SDI that runs through 2030.
The battery sector faces mounting headwinds. Many governments are reducing subsidies for EVs, weakening demand. Tesla's sales fell 4.8% on the year by volume in the April-June quarter. Toyota Motor and other Japanese players are shifting their focus to hybrids.
In response, LG Energy Solution in June paused construction of a new battery plant in Arizona. Panasonic Holdings scrapped its sales target through fiscal 2030.
Panasonic scrapped its timetable for EV battery sales amid flagging global demand. (Photo by Yo Inoue)
Battery components makers from Japan see North America as the key to weathering the global downturn in demand.
In a bid to bolster American EV supply chains, President Joe Biden's administration is requiring that vehicles use batteries and battery components manufactured in North America in order to qualify for electric vehicle tax credits. The U.S. also restricts the entry of Chinese players into its market, leaving more room for Japanese components makers in North America.
Asahi Kasei, a leading separator supplier, is building a 200 billion yen ($1.38 billion) plant in Canada in partnership with Honda Motor. The facility is expected to start operating in 2027.
Sumitomo Metal Mining is considering expanding production of lithium iron phosphate (LFP) cathodes, including at an existing plant in Vietnam. Though Chinese players control much of the market, "we are seeing more inquiries from U.S. and European automakers that are shifting away from China," the company said.
LFP batteries deliver a smaller driving range compared with higher-performance alternative lithium nickel cobalt aluminum oxide, or NCA, batteries. Chinese players are expanding their share in the former, while Japanese companies continue to hold an edge in cathodes for the latter.
Concerns over Chinese EV batteries are growing as well. Several electric vehicles equipped with Chinese batteries spontaneously caught fire in South Korea in August, stoking fears over their safety.
The U.S. and European governments are also moving to curb their dependence on Chinese batteries, concerned that Beijing could threaten to suspend exports as a bargaining chip in trade negotiations.
