SINGAPORE, Oct 5 (NNN-Bernama) — Asian electric vehicle (EV) battery makers will invest in onshore facilities in the United States and Europe over the next few years to maintain their global lead, according to S&P Global Ratings.
In its report titled “Asian battery makers are shifting strategies to hold onto global lead” Thursday, the credit ratings provider said that in China higher export sales will help offset domestic oversupply pressures, but a shakeout of weaker players is likely.
“To keep their lead, many EV battery suppliers are increasingly investing abroad. Leading players with strong global partnerships will stay on top amid this industry shift,” said S&P Global Ratings credit analyst Stephen Chan.
He added that some weaker ones in China may not survive.
S&P Global Ratings said China’s battery industry is the most vulnerable to consolidation over the next few years due to overcapacity.
According to its estimates, utilisation at battery factories in China languished at under 50 per cent over the first eight months of 2023.
It said exports are helping to offset some of the pain, with China’s share of the global battery market on the rise.
“We believe Chinese battery makers with stronger export channels and global alliances will outperform in the coming years,” said Chan.
S&P Global Ratings said Chinese suppliers will focus on increasing their market share in Europe while South Korean and Japanese competitors see stronger opportunities in North America, where they face less Chinese competition due to US-China trade tensions.
“These efforts could increase debt and capital expenditure burdens for the companies expanding overseas,” S&P Global Ratings credit analyst Jeremy Kim said, adding that in the United States, Korean automakers will expand the most aggressively.
S&P Global Ratings noted that even as industry dynamics change, market leaders such as China’s Contemporary Amperex Technology Co Ltd and South Korea’s LG Energy Solution Ltd are benefiting from “first mover” advantages.
“We expect profit expansions to keep their leverage stable as they continue to build capacity,” it said.
— NNN-BERNAMA