Coronavirus impact spreads to China's battery sector

GlobalData analysis reveals that the COVID-19 outbreak in China will affect the green energy sector, impacting renewable energy sources, battery energy storage, electric vehicles (EVs), and renewable heating and cooling.

Global car manufacturers are looking for independence from the current supremacy of Chinese battery manufacturers and are looking to secure their own battery supply chains.

“China’s attempt to fight the coronavirus outbreak has led to delayed production across a number of battery production facilities located in key coronavirus-hit provinces and is expected to lower the output of Chinese battery manufacturers by around 26 GWh in 2020,” GlobalData Senior Power Analyst Sneha Susan Elias said.

The supply constraint is also predicted to impact global EV markets and energy storage projects, causing project delays or increased battery prices.

“The industry’s overdependency on China has been showcased recently, with the coronavirus outbreak leading to disruptions in the supply of components,” Elias said.

“China itself is expected to take a beating on production of around one million vehicles. The country exports around US$70 billion worth of car parts and accessories worldwide, with nearly 20% going to the US.”

GlobalData research also suggests that lower oil prices as a result of the COVID-19 crisis could reduce EV demand.

GlobalData Automotive Analyst Mike Vousden said, “GlobalData’s analysis suggests that low oil prices will lead to a longer waits for the reduced fuel costs offered by electric vehicles to amortise their higher purchase prices.”

EVs typically cost more than an equivalent internal combustion engine (ICE) vehicle but their lower running costs reduce that price differential over time and, in the longer term, end up costing less overall than their ICE counterparts. However, the amount of time taken to make up that price differential depends on the cost of fuel. Higher prices at the pumps mean EVs make up their extra purchase cost sooner, while lower fuel prices see ICE cars remain cheaper than EVs for longer.

“Much lower pump prices for gasoline and diesel have been ushered in by the COVID-19 crisis and a big hit to global oil demand. If pump prices are low in the long term, this will throw into question the economic case for users switching to electric vehicles,” Vouden said.

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