A new wave of capacity expansion is sweeping China’s power battery sector, with BYD, CATL, AVIC Lithium Battery, Guoxuan High-Tech, and Sunwoda all racing to expand their operations. Recently, CATL invested a whopping 50 billion yuan to partner with the “Lithium Capital of Asia,” while AVIC Lithium Battery, as an industry leader, is hot on its heels, setting its sights on Hefei—the “Detroit” of China’s new energy vehicle industry.

On August 10 , AVIC Lithium Battery signed an investment agreement with Hefei City. The AVIC Lithium Battery Hefei Base Project , with a total investment of 24.8 billion yuan, has officially been established in Changfeng County, Hefei, where a new industrial base with an annual production capacity of 50 GWh for power batteries and energy storage batteries will be built.

A 100-Meter Dash—Every Second Counts

The finalization of the Hefei project also provides a solid foundation for its future expansion. Since the beginning of this year, AVIC Lithium Battery has accelerated its capacity expansion and now operates six major industrial bases in Changzhou, Luoyang, Xiamen, Chengdu, Wuhan, and Hefei. Additionally, AVIC Lithium Battery is planning to establish overseas operations and is moving forward with the construction of a European factory. Among these, Luoyang, Henan, is the “birthplace” of AVIC Lithium Battery.It is understood that AVIC Lithium Battery’s Luoyang base primarily produces batteries for new energy commercial vehicles, energy storage batteries, and special-purpose power sources, with a current production capacity of 10 GWh. Whether the base will further expand its capacity will be determined by market demand in the future. In China’s long-dormant power battery industry, AVIC Lithium Battery emerged last year like a “dark horse,” achieving a stunning comeback at a breathtaking pace.It is reported that according to AVIC Lithium Battery’s strategic plan, its power battery production capacity is set to exceed 200 GWh during the 14th Five-Year Plan period. Therefore, the possibility of further capacity expansion cannot be ruled out.

Planting Rice in the Fields — Overtaking the Leaders

AVIC Lithium Battery is one of the pioneers in China’s power battery sector. As early as 2007, when the domestic new energy vehicle industry was still in its infancy, the company’s predecessor—Sky Energy (Luoyang) Co., Ltd.—was established in Luoyang.In September 2009, with joint investment from the Aviation Industry Corporation of China (AVIC) and the China Academy of Air-to-Air Missiles, Sky Energy was officially renamed AVIC Lithium Battery, and the lithium iron phosphate battery route became its primary R&D focus. Judging by its origins alone, AVIC Lithium Battery certainly had a strong background, backed by AVIC, and achieved mass production of its products shortly after its founding. It is important to note that at that time, AVIC Lithium Battery was pursuing the lithium iron phosphate battery route. Just as AVIC Lithium Battery was setting sail, Fujian’s Ningde welcomed a new power battery manufacturer: CATL. Unlike AVIC Lithium Battery, CATL chose the higher-cost ternary lithium battery technology from the very beginning. LFP batteries are low-cost but have low energy density. Ternary lithium batteries are high-cost but have high energy density. Driven by consumers’ demand for longer ranges in new energy vehicles, the energy density of power batteries has garnered increasing attention. Coupled with national policy guidance, ternary lithium batteries have gradually become the mainstream.

It might seem that AVIC Lithium Battery missed a golden opportunity in the early years, causing it to fall behind. However, the company began to vigorously realign its business strategy, shifting its focus from primarily supplying commercial vehicles to passenger vehicles, and concentrating its production capacity on ternary lithium batteries. Following these adjustments, AVIC Lithium Battery has caught up in the past two years and achieved impressive results. In the domestic power battery installation volume rankings for the first half of 2021, CATL ranked first with 25.76 GWh, followed by BYD and LG Energy Solution in second and third place with 7.65 GWh and 4.72 GWh, respectively. AVIC Lithium Battery ranked fourth in installation volume (third among domestic manufacturers) with 3.63 GWh. Currently, AVIC Lithium Battery has become the largest battery supplier for GAC Aion’s flagship models, with a supply rate exceeding 90%. Additionally, AVIC Lithium Battery’s major clients include Changan Automobile, Geely Automobile, and SAIC-GM-Wuling.

Raising Eyebrows — Demonstrating Foresight

With the rapid recovery and explosive growth of the entire new energy vehicle industry, demand for batteries continues to climb, sparking concerns about a “battery shortage.” Amid this, AVIC Lithium Battery is accelerating its expansion efforts and exploring every avenue to break through the competition, having surpassed South Korea’s LG Energy Solution in installed capacity this past April. It is safe to say that this “battery shortage” presents an excellent opportunity for AVIC Lithium Battery. Currently, Hefei is home to major automakers such as BYD, NIO, and JAC Volkswagen. The completion of AVIC Lithium Battery’s Hefei base project facilitates more convenient collaboration with leading automakers and further enhances Hefei’s new energy vehicle industrial chain—a key factor in this development. Additionally, Hefei is leveraging lithium battery and related materials production as a breakthrough point to vigorously attract “giants” in the new energy battery industry, aiming to build a 100-billion-yuan-scale full industrial chain for power lithium batteries. Although CATL and BYD have been continuously expanding their production capacity, it cannot be ignored that even these industry giants struggle to fully meet the demands of the rapidly growing new energy vehicle sector. More critically, the supply of raw materials for lithium batteries is largely constrained by limited domestic resources.For example, Indonesia is the world’s largest producer and exporter of nickel, with nickel ore reserves of approximately 1.3 billion tons. Therefore, to capture a larger market share, AVL will further expand its raw material footprint in the future, which also underscores the need for overseas capacity expansion.

Conclusion

The “battery shortage” has created opportunities. During this rare window of growth, will the second-tier players in the power battery sector be able to seize these opportunities? Currently, AVIC Lithium Battery has seized the “Hefei opportunity.” If it can successfully advance, rapidly improve its market ranking and market share, and strengthen its technological capabilities, its future prospects will certainly be promising.