Li-ion Battery: Global Retreat, China Advance — A Strategic Rebalancing Act
— SolarEdge, Tesla, Panasonic, Siemens, CATL, BYD, Hithium, Envision
The global race for lithium-ion battery supremacy is far from over, but the scoreboard is undeniably leaning heavily in one direction: China. While other nations, particularly in Europe and North America, are striving to build robust domestic battery supply chains, recent trends reveal a significant global retreat in manufacturing ambitions, even as Chinese enterprises continue their formidable and contrasting advance. This dynamic isn’t just about market share; it’s a strategic rebalancing act driven by cost pressures, technological shifts, and a fundamental divergence in industrial philosophy.
The Unmistakable and Expanding Dominance of China
China’s control over the lithium-ion battery value chain is comprehensive and deeply entrenched. From raw material processing to cell manufacturing and even recycling, China has cultivated an unparalleled ecosystem.
Manufacturing Powerhouse: In 2024, China accounted for a staggering 76% of global lithium-ion battery production, reaching 1,170 GWh. This represents a significant leap from 57% in 2021 and 68.3% in 2022. The sheer scale of Chinese production, driven by massive domestic demand for electric vehicles (EVs) and energy storage systems (ESS), allows for unparalleled economies of scale and cost efficiency.
Raw Material Control: Despite holding less than 7% of the world’s lithium reserves, Chinese companies control a substantial portion of global lithium mining capacity and dominate the processing of critical minerals like lithium, cobalt, and graphite. For instance, China processes over 90% of the world’s graphite and in 2022, Chinese companies accounted for over two-thirds of the world’s cobalt and lithium processing capacity. This strategic control over upstream components gives China a powerful chokehold on the global supply chain.
Technological Leadership, Especially in LFP: China is a significant adopter and innovator in Lithium Iron Phosphate (LFP) battery technology, which offers cost-effectiveness and enhanced safety. In 2024, LFP batteries dominated the Chinese EV market, accounting for 64% of the market and climbing to nearly 80% by November 2024. Chinese manufacturers control 92.3% of global LFP battery production capacity and 87.6% of worldwide LFP battery shipments. This focus on LFP further differentiates China’s battery industry and provides a significant cost advantage (40–45% lower production costs than foreign competitors, according to Benchmark Mineral Intelligence).
Recycling Prowess: China also leads in Li-ion battery recycling, holding approximately 70% of global battery recycling capacity. As the first wave of EV batteries reaches end-of-life, this recycling capability becomes crucial for sustainable material recovery and reducing reliance on new mining.
The Retreat and Strategic Adjustments of International Players
While ambitions remain high in Europe and North America to establish independent battery industries, the reality on the ground paints a picture of significant challenges and a strategic retreat from direct battery cell manufacturing by several prominent international companies.
SolarEdge Exits Battery Manufacturing: In early 2025, Israeli smart energy giant SolarEdge Technologies announced its exit from the battery manufacturing business, selling the facilities of its South Korean subsidiary Kokam. This signals an abandonment of vertical integration to refocus on solar inverters and smart energy management, a decision driven by “industry trends and the competitive environment,” particularly in the utility BESS segment.
Tesla Slows 4680 Battery In-House Production: In 2024, Tesla, despite its pioneering work with the 4680 battery, shifted to increasing procurement from CATL and LG Energy Solution and postponed expansion of its own battery factories. This was due to slow yield improvement, persistently high costs, and the growing proportion of cost-effective LFP batteries, which reduced the economic viability of in-house high-nickel battery production. While Tesla’s internal 4680 production costs have reportedly dropped below external suppliers in early 2025, the initial struggles highlight the complexity.
Panasonic Adjusts Battery Business Layout: While continuing to expand 4680 production in Nevada and planning new factories in Kansas, Panasonic announced in April 2025 the cessation of its solar and battery storagebusiness lines. Their strategic focus is optimizing resource allocation, concentrating on high-energy-density automotive batteries, and avoiding direct competition with giants like CATL and BYD in the broader battery market.
Siemens Energy Focuses on System Integration: In 2024, Siemens Energy declared it would no longer directly invest in battery cell production. Instead, it collaborates with specialized battery manufacturers to provide comprehensive energy storage system integration solutions (BESS) and related technical services. This shift is a response to intense price competition, declining profit margins in manufacturing, and a desire to focus on higher-value system solutions.
Commonality: These companies, due to technological route uncertainties (e.g., challenges with 4680, LFP’s rise), intense cost pressures, and a perceived trend towards specialized division of labor, have chosen to adjust or scale back battery cell manufacturing. They are increasingly relying on supply chain cooperation or focusing on higher-value segments like system integration or core automotive battery development.
Chinese Companies: Accelerated Vertical Integration and Global Expansion
In stark contrast to the strategic adjustments of international companies, Chinese new energy enterprises are not only vigorously promoting in-house battery production but are also accelerating their expansion into global markets, often integrating international resources in reverse.
CATL: Globalization + Technology Diversification: In 2024, CATL announced new battery factories in Thailand and Hungary, significantly expanding its overseas presence. Concurrently, it is deploying multiple technology routes, including NMC, LFP, and sodium-ion batteries, to meet diverse market demands. Their strategic logic is to leverage scale advantages and a mature supply chain to further consolidate global market share.
BYD: Full Industrial Chain Coverage: BYD accelerated overseas factory construction (Brazil, Indonesia) in 2023–2024 and expanded the application of LFP batteries in the energy storage market. Its Fudi Battery subsidiary not only supplies its own needs but also provides batteries to external customers like Tesla and Toyota. BYD’s strategy is comprehensive vertical integration, from lithium mining to battery recycling, aimed at reducing costs and enhancing pricing power.
Hithium: Overseas Manufacturing to Circumvent Barriers: Chinese energy storage battery producer Hithium plans to open a $100 million factory in Texas, US, later in 2025, with an annual capacity of 10 GWh. This is part of a broader trend among Chinese manufacturers (including CATL, BYD, and EVE Energy) to establish overseas production to circumvent rising tariffs and maintain market access, particularly in the face of a 40.9% US levy on ESS battery exports.
Envision Energy: Acquisition + Independent Production in Parallel:Envision acquired Nissan’s battery business in 2024, strengthening its power battery technology. Simultaneously, it expanded its energy storage battery base in Inner Mongolia, focusing on the grid-scale energy storage market. Its strategic logic is to rapidly acquire technology through mergers and acquisitions while ensuring supply chain security through independent production.
Commonality: Chinese companies, leveraging strong policy support, inherent cost advantages from scale and domestic supply chains, and robust market demand, continue to increase investment in battery manufacturing, often through aggressive vertical integration and outward expansion.
Industry Insights: Is Vertical Integration Still the Future?
The contrasting strategies of international companies like SolarEdge and Tesla versus the expansion of Chinese companies highlight a fundamental debate in the energy storage industry: Specialized Division of Labor versus Vertical Integration.
Specialized Division of Labor: International companies are increasingly adopting a “light-asset” model, focusing on their core competencies (e.g., SolarEdge’s inverters, Tesla’s vehicle manufacturing, Siemens Energy’s system integration). They prefer to rely on external procurement for battery cells, leveraging the expertise and scale of specialized battery manufacturers.
Vertical Integration: Chinese companies, conversely, aim to reduce costs, enhance pricing power, and gain significant supply chain control through a full industrial chain layout. This end-to-end control allows for greater efficiency, cost optimization, and resilience against external shocks.
Technology Route Determines Strategy: The increasing dominance of LFP batteries, due to their cost and safety advantages, has become a primary focus for Chinese companies. For companies previously heavily invested in high-nickel chemistries, the shift in market preference and raw material price volatility (like with NMC batteries) can lead to a re-evaluation or even exit from certain battery manufacturing segments.
Future Outlook
The “global retreat, China advance” trend is likely to continue, but with evolving complexities:
International Companies: Expect further adjustments in non-core battery businesses, shifting towards deeper technological cooperation and long-term supply agreements with established battery manufacturers, particularly from Asia.
Chinese Companies: Their global expansion may face increasing trade barriers (e.g., EU carbon tariffs, the US IRA Act), which is already spurring them to establish overseas production facilities. However, their significant cost advantages, technological prowess in LFP, and established supply chains will likely keep them proactive and competitive in the global market.
Diversification and Localized Production: The strategic imperative for energy security and supply chain resilience will continue to drive efforts in North America and Europe to build domestic battery capacities, even if this means collaborating with or licensing technology from Asian leaders.
Innovation Beyond Li-ion: The pursuit of next-generation battery chemistries (e.g., solid-state, sodium-ion) will remain a critical area for all players, offering potential future differentiation and a path to challenge existing market dynamics.
SolarEdge’s decision is not just a company’s strategic adjustment but a clear microcosm of the changing competitive landscape in the entire new energy industry. The trend of “global retreat, China advance” reflects a strategic re-calibration, highlighting the intense competition and the formidable industrial might of China in shaping the future of energy storage.