FOCUS: China removes high-energy density requirement for new EV battery projects

A requirement for a higher energy density for new EV battery projects has been removed from the official regulations on automobile industry investment published by the country’s National Development and Reform Commission (NDRC) on its website.

The energy density threshold was removed from the final version of the regulations on Tuesday December 18 owing to the fact that current technology is not developed enough to support an EV battery reaching such a high-energy density, according to market participants.

“The extent to which a Chinese EV battery can reach a high-energy density depends on the development of technology and innovation,” a battery producer said.

“Progress is decided by the [EV battery] market, not policy,” he added.

According to the consulting draft of the regulation, published by the NDRC in July 2018, EV batteries were required to be no less than 300Wh per kg per unit, and 220Wh per kg for each battery system respectively.

This change could also signal the government will alter its policy of increasing the minimum energy density of batteries produced by EV manufacturers in order to receive a subsidy in 2019, according to some market participants.

“The Chinese government might not necessarily further raise the requirement of the driving range and energy density for EV manufacturers to get a subsidy next year,” Vicky Zhao, Fastmarkets MB battery raw materials research analyst, said.

To be eligible for the subsidy in 2018, EVs must have a minimum driving range of 150km, up from a minimum of 100km in 2017, according to the new subsidy policy launched on February.

To achieve a high-energy density and longer driving range, the EV manufacturers and battery producers need to shift to a nickel-rich nickel-cobalt-manganese (NCM) battery, which will reduce the amount of cobalt in batteries.

As a direct result, buying interest for cobalt sulfate, a key material in NCM batteries, has fallen, pressuring the spot cobalt sulfate price in the domestic Chinese market since mid-April. 

Fastmarkets MB assessed the Chinese cobalt sulfate price at 65,000-68,000 yuan ($9,430-9,865) per tonne on December 19, falling almost continuously from its record high of 145,000-150,000 yuan per tonne on April 11. 

However, cobalt sulfate demand improved in the fourth quarter on some consumers’ expectations that the Chinese government might not raise the threshold for the EV subsidy in 2019.

The Chinese cobalt sulfate price has stabilized in December, mostly underpinned by active inquires as a result of stockpiling for the Chinese New Year holiday during February 4-10.

“It is still too early to say how much support the removal of the requirement for higher energy density in this regulation could give to the spot cobalt sulfate price,” a second battery material producer said.

The removal of the requirement could also be positive for new investment.

“So far, no battery producers in China can reach the required energy density [specified in the draft of the regulation],” Zhao said.

“Therefore, it is very hard to attract new investment in the lithium-ion battery industry or encourage battery producers to expand their businesses,” Zhao added.

High-energy density will remain a trend in future
Although the NDRC removed a requirement for a higher energy density for new EV battery projects in its regulations, the Chinese government will continue to encourage the adoption of EVs with higher energy density, according to market participants.

The aim of removing the regulatory requirement on energy density is to encourage new investment in the EV battery industry, given the current bottleneck in technologies, according to Zhao. She added that the general trend will still be for EV batteries with higher energy density.

“The government will just pause the requirement. However, the whole EV battery industry is still heading towards a trend for a higher energy density,” a third battery materials producer said.