Impact of COVID-19 on the Global Lithium-Ion Battery Market
The global market for lithium-ion batteries has been negatively impacted by the COVID-19 pandemic, mainly due to China’s work restriction measures. Over the last five years, China has dominated the lithium-ion battery supply chain from raw materials and electrode material production to battery and pack production. However, the virus has brought to light weaknesses in the China-first sourcing strategies. This may result in the production shifting back to Japan and South Korea. China has been supporting the increased use of electric vehicles (EVs) through government funding. As the domestic demand is so high for li-ion batteries, China is expected to make sure to maintain battery production domestically. The global market is expected to witness a 10% lithium-ion battery supply reduction due to a slowdown in production activities in China. However, China and many other countries in Asia, including Japan and South Korea, have begun producing 60% to 70% of pre-virus levels after the restrictions on production facilities were lifted. Even though the risks of battery supply are mitigated, the recession of 2020 is likely to foresee the additional downward pressure on demand as consumers will spend less on residential energy storage, thereby affecting the lithium-ion battery market.
FIGURE: LITHIUM ION BATTERIES EXPORTERS, USD MILLION (2018)
As per the US Energy Storage Association, globally, approximately 40% of the market players manufacturing batteries are expected to reduce their workforce due to the impact of the pandemic, while almost 50% are anticipating reduced revenues. In the US, the power industry is likely to suffer from this reducing workforce as the delays in the energy storage projects are expected to lead to disruptions in the grid reliability and resiliency efforts. However, utilities are trying to incorporate energy storage systems as power backup to prevent power cuts in healthcare facilities and other critical sectors. Although energy storage projects are likely to move forward in the country, the project leaders are expected to suffer shipping delays and supply line disruptions. These factors are likely to affect the lithium-ion battery market in the next few months as the production of batteries has been heavily affected by the pandemic.
Source: Primary Experts, Secondary Sources, and MRFR Analysis
Source: Secondary Sources