China's Battery Capacity to Exceed 6 TWh, MIIT Minister Warns Against 'Excessive Competition'

Beijing – China's Ministry of Industry and Information Technology (MIIT) Minister Li Lecheng recently convened a meeting with top battery industry executives, delivering a stern warning against what he termed "involutionary competition" or "内卷式" 竞争, signifying excessive competition within the sector. During the symposium, Minister Li emphasized the critical need for industry leaders to "fully and objectively understand the industry’s development situation, conscientiously implement the Party Central Committee’s decision to comprehensively rectify ‘involutionary’ competition," as quoted by Michael Dunne via @hjesanderson. This statement underscores Beijing's growing concern over potential overcapacity in the burgeoning battery market.

The warning comes amidst a significant surge in China's battery manufacturing capabilities, with planned capacity projected to surpass 6 terawatt-hours (TWh). This immense capacity is reportedly sufficient to meet global battery cell demand until 2035, according to industry analysis. Experts suggest that China's electric vehicle (EV) battery industry alone could face overcapacity reaching four times demand by 2025, posing a substantial risk to smaller manufacturers.

"Involutionary competition" in this context refers to intense, often self-defeating price wars that erode profitability and hinder long-term growth opportunities for the entire supply chain. This phenomenon has already led to an "involution-style" inventory clearance within the industry, affecting operational conditions across the board. The MIIT's intervention aims to prevent such cutthroat competition from undermining the strategic importance of China's battery sector.

In response to these concerns, the MIIT has pledged to implement targeted measures, including guiding companies toward scientific capacity planning and promoting reasonable, orderly overseas expansion. The ministry also plans to increase supervision of production consistency and product quality, crack down on intellectual property violations, and has recently published draft rules to raise minimum standards for lithium battery specifications. Executives from major players like BYD's Wang Chuanfu and CATL's Li Ping were among the 12 key industry figures present at the meeting, highlighting the broad impact of these directives. This move mirrors past government interventions in other sectors, such as solar and steel, which have also experienced similar overcapacity challenges and subsequent consolidation.