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An illustration of a BYD battery plant under construction in Wenzhou, east China’s Zhejian province, and set for operation in 2024. Photo: Handout

China’s BYD breaks ground on EV battery plant, betting nearly US$1 billion despite concerns of oversupply

  • New plant in Wenzhou, in east China’s Zhejiang province, will produce enough batteries to power 200,000 electric cars per year
  • Announcement comes two weeks after plans came to light for BYD to build a US$1.2 billion battery plant in Henan province
BYD, the world’s largest electric vehicle (EV) maker by sales, has started construction of a new battery plant in Wenzhou, in east China’s Zhejiang province, raising its bet on the country’s electrification drive.

The Shenzhen-based carmaker and EV battery producer’s new facility will be able to churn out 20 gigawatt-hours (GWh) of batteries annually when construction is completed – enough to power about 200,000 electric vehicles.

The first phase of the factory, with planned investment of 6.5 billion yuan (US$936 million), will employ 6,000 and generate annual sales of 16 billion yuan when it becomes operational in early 2024, according to a statement by Wenzhou’s city government.

The announcement comes two weeks after an environmental-assessment report revealed BYD’s plan to build a US$1.2 billion battery plant in Zhengzhou, the capital of central Henan province.
An assembly line producing blade battery packs at a BYD factory. Photo: Handout

“Top players like BYD do not seem to be worried about overcapacity, as they continue to expand production,” said Gao Shen, an independent analyst in Shanghai. “It is expected that more car assemblers will use BYD as their battery supplier.”

Founded by Chinese billionaire Wang Chuanfu in 1995, BYD started as a battery producer before it began building vehicles in 2003.
Last year, the company, backed by Warren Buffett’s Berkshire Hathaway, dethroned Tesla as the world’s largest EV maker, buoyed by sizzling sales of its cars in the mainland China market.

How a price war among China’s EV battery makers could benefit consumers

The Hong Kong and Shenzhen-listed carmaker more than tripled its annual sales to 1.86 million units in 2022, mostly in China, the world’s largest EV market.

Tesla delivered about 1.31 million EVs last year. While that total was up about 40 per cent from 2021, the US carmaker failed to reach its 2022 goal of delivering more than 1.4 million units.

Unlike Tesla, which assembles premium EVs priced at more than 200,000 yuan, BYD’s battery-powered cars target middle-income customers in the world’s largest automotive market, with prices between 100,000 and 200,000 yuan.

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The company’s blade lithium iron phosphate battery packs have proved popular with drivers and car assemblers. The battery cells are arranged in a manner that increases energy density while enhancing resistance to overheating, according to the company. The blade batteries have also been supplied to Tesla’s factory in Berlin.

Despite strong growth in the EV sector, worries about excess battery capacity surfaced last year as analysts warned that some manufacturers had been too optimistic about the market outlook.

Mainland Chinese manufacturers will produce an estimated 3,000 GWh of EV batteries in 2025, according to a report in November by the Economic Daily, a newspaper run by the State Council.

Battery glut: China’s supply of electric-car batteries to far exceed demand

That estimate, based on expansion plans unveiled by the major battery producers, equals three times the expected 2025 demand from domestic electric-car makers, the Economic Daily said.

CATL, based in Ningde, east China’s Fujian province, was the world’s largest EV battery supplier in 2022, with a 37 per cent market share.

BYD, trailing CATL and LG Energy Solution worldwide, produced 70.4 GWh batteries in 2022, up 167 per cent on year, and held 13.6 per cent of the global market.

Chinese EV battery makers dominated the global market in 2022, with six companies featuring among the world’s top 10 players. The four companies on the list in addition to CATL and BYD were CALB, Gotion High-tech, Sunwoda, and Svolt.