Raise battery tariffs! The United States may be "counterattacked"

　　The U.S. government announced on May 14 that it would further increase tariffs on electric vehicles, lithium batteries, critical minerals and other products imported from China on the basis of the original Section 301 tariffs on China.

　　As one of the main demand markets for new energy vehicles and new energy batteries in the world, the U.S. government's move has sparked heated discussions in the industry. At the same time, what impact will this have on the mainland's new energy battery industry chain? This article will analyze several core levels.

01

Raise the tariff rules

　　The U.S. government has raised import tariffs this time, and the specific implementation rules for tariffs on products related to lithium batteries and electric vehicle industry chain are as follows:

　　It is worth noting that there are two time nodes for the above-mentioned tax rate to land, according to their chronological order, from 2024, the US government will first increase the tariff rate of China's electric vehicles from the original 25% to 100%; The tariff rate on lithium batteries and their parts for electric vehicles has been increased from 7.5% to 25%; With the exception of natural graphite, the tariff rate on other critical minerals has been increased from 0 to 25%.

　　The tariff rate for lithium batteries and natural graphite for non-electric vehicles will be increased to 25% from 2026.

02

Raise tariffs and treat them differently

　　According to market-related data, it may be difficult for the United States to get rid of its dependence on China's lithium battery industry chain for a while, and the impact of the U.S. tariff increase can be seen from different dimensions such as lithium batteries, critical minerals, and electric vehicles.

　　1. Lithium battery

　　According to data from the General Administration of Customs of the People's Republic of China, from 2020 to 2023, the United States has been the number one destination for China's lithium battery exports for four consecutive years. In 2023, China's exports of lithium batteries to the United States will reach $13.549 billion, accounting for 20.8% of total exports. In the first quarter of 2024, the United States will remain China's largest exporter of lithium batteries, with an export value of $2.908 billion, accounting for 22% of total exports.

　　This shows that the United States maintains a high demand for lithium battery installations, but because the United States has not yet built a complete lithium battery industry chain, and American lithium battery companies rarely have mass production capacity, their localized lithium battery technology and production capacity gap is large, therefore, to a large extent, it depends on China's lithium battery supply chain as the world's "lithium brother".

　　In terms of the market, power, energy storage, and consumer are currently the three main application areas of lithium batteries, and the United States has raised tariffs this time to treat lithium batteries in different fields differently.

　　In the field of power, at present, China's installed capacity of power lithium batteries has led the world for 7 consecutive years, and has been widely recognized by global mainstream car companies including Tesla, Toyota, Volkswagen, BMW, Mercedes-Benz, Ford, etc. On the other hand, the United States has previously issued the "Inflation Reduction Act" and related bills, industry insiders believe that combined with the increase in tariffs, it reveals the rapid development of China's lithium battery industry in the United States, and its local enterprises are difficult to catch up with anxiety, and want to adopt a series of policies to hinder the strong development momentum of Chinese enterprises.

　　This time, the United States will start to raise tariffs on power lithium batteries this year, which also reflects its impatience to increase the cost of China's power lithium batteries to prevent Chinese power lithium batteries from entering the US market.

　　In the field of energy storage, the United States will increase tariffs on lithium batteries for non-electric vehicles, including energy storage lithium batteries, from 2026, which reveals that compared with power lithium batteries, the demand for energy storage lithium batteries in the United States at this stage is more vigorous and urgent.

　　On the demand side, the U.S. energy storage market will remain in a period of high growth in the next few years, and the market will continue to boom.

　　EIA data shows that at the end of March 2024, the scale of large-scale energy storage projects under construction in the United States reached 11.6GW, compared with the grid-connected scale of 6.7GW in 2023, and its large-scale storage construction has further accelerated, which is expected to promote the rapid growth of local energy storage installations.

　　On the supply side, according to SNE Research data, the total market share of the top 8 Chinese companies in global energy storage battery shipments in 2023 will be as high as 89.2%, and the market share advantage is highlighted.

　　According to rough statistics, energy storage owners in the United States, including Tesla, FlexGen, Powin, Fluence, Primergy, Nextera, Energy Vault, SUNPIN SOLAR, etc., have reached relevant cooperation with Chinese battery companies such as CATL, EVE Lithium Energy, Guoxuan Hi-Tech, Ruipu Lanjun, and Envision Power, and it is estimated that the total number of orders for related energy storage batteries may exceed 60GWh. This also shows the high dependence of U.S. energy storage owners on Chinese lithium batteries.

　　In the consumer field, in the main application scenarios including power tools and 3C digital, China's lithium batteries are also one of the main procurement sources for American consumer electronics companies. This time, the United States announced that it will increase tariffs on consumer lithium batteries from China from 2026, leaving a certain buffer period for Chinese battery companies.

　　2. Critical minerals

　　According to the data, following the decision of the U.S. Treasury Department to relax the import restrictions on raw materials such as graphite, electrolyte lithium salts, adhesives, additives and other raw materials for power lithium batteries, the United States will postpone the starting time of tariffs on natural graphite for batteries to 2026, reflecting the dominant position of China's natural graphite and other materials supply.

　　At present, the main production capacity of global anode materials is concentrated in China. A leading anode material company told the media that the U.S. new energy vehicle market is still inseparable from the supply chain of Chinese companies at this stage. Based on factors such as the speed of infrastructure construction, power support, and skilled workers in the United States, it is estimated that it will be difficult for the production capacity of anode materials in the United States to form effective competitiveness in 3-5 years.

　　3. Electric vehicles

　　According to market data, the total export volume of mainland automobiles in 2023 will be 4.91 million units, and the export value will exceed the $100 billion mark. Among them, 2.2 million new energy vehicles were exported, accounting for more than 40% of the total.

　　It is worth noting that last year, China's direct exports of pure electric vehicles to the United States amounted to only 368 million US dollars, and the US market accounted for less than 1% of China's new energy vehicle exports, indicating that it has not yet occupied a significant position in the mainland automobile export market.

　　Therefore, although the U.S. has the largest adjustment to the tariffs on electric vehicles, the actual impact on mainland NEV exports is relatively limited.

03

Overseas layout of Chinese enterprises

　　For entering the U.S. market, at present, the scale of China's power lithium battery direct exports to the United States is not large, and the increase in tariffs has little impact on Chinese enterprises; The United States is one of China's major exporters of energy storage lithium batteries, and raising relevant tariffs will have a greater impact on both sides.

　　In other words, there is still a buffer period of about one and a half years for raising tariffs on energy storage lithium batteries, and Chinese companies still have opportunities for "change".

　　In fact, for the United States to prevent Chinese lithium batteries from entering the U.S. market for a long time, Chinese battery companies have long predicted and have made overseas layouts in advance.

　　On May 15, EVE said on the interactive platform that in terms of power batteries, it currently has no products directly exported to the United States, and the new tariffs have no impact on it; In terms of non-power batteries, it has laid out its Malaysian factory in advance and planned the production capacity of consumer batteries and energy storage batteries, which is expected to support deliveries to local customers in the United States in 2026.

　　EVE believes that having overseas factories and production capacity will be able to enhance the competitiveness of products from the perspective of reducing the impact of tariffs.

　　In fact, in addition to exporting batteries, technology licensing and overseas factories have long become an important layout for Chinese battery companies to "go overseas".

　　CATL exports battery technology to Ford, GM and other car companies through technology licensing; In September last year, EVE announced that its wholly-owned subsidiary, EVE America, had established a joint venture with Electrified Power, Daimler Truck, and PACCAR, and would have a layout in the United States; In the same month, Gotion Hi-Tech announced that it would spend US$2 billion to build a new power battery gigafactory in Manteno, Kankaki County, Illinois, USA.

　　Moreover, not limited to the U.S. market, Chinese battery companies have also targeted other overseas markets for relevant production capacity layout. According to public information, at present, the overseas factories of Chinese companies such as CATL, EVE Lithium Energy, Guoxuan Hi-Tech, Funeng Technology, Envision Power, and Xinwangda have been put into operation or are under construction, and it is expected that overseas production capacity will be intensively released in 2025, and the global layout is about to enter the harvest period.

04

This move by the United States may be "counterattacked"

　　It should be mentioned that behind the market share of power and energy storage lithium batteries, China is also leading the world in lithium battery technology, and even is irreplaceable in some key areas.

　　Compared with ternary lithium batteries, lithium iron phosphate batteries have become one of the main forces in the field of power and energy storage due to their advantages of lower cost, higher safety performance, and no nickel/cobalt rare minerals.

　　According to the data, in April 2024, in terms of the installed capacity of power batteries in the Chinese market, the installed capacity of lithium iron phosphate batteries accounted for more than 70% of the total installed capacity, and at present, China's lithium iron phosphate battery technology has supported the vehicle range of more than 700 kilometers and achieved ultra-fast charging of 2C and above, which greatly alleviated the range anxiety and energy supplement anxiety that plagued electric passenger car users.

　　At present, mainstream traditional automobile groups, including Volkswagen and Toyota, have increased the size of lithium iron phosphate models, and regard it as an important layout to improve the competitiveness of their electric vehicle market.

　　The same is true for energy storage. Due to the limited application of ternary lithium batteries in the field of energy storage, many energy storage owners around the world, including the United States, mainly purchase Chinese lithium iron phosphate energy storage batteries.

　　This is mainly because among the three lithium battery powerhouses of China, South Korea and Japan, only China has the most advanced lithium iron phosphate battery technology and mature battery supply chain and production capacity.

　　In fact, not only at the battery level, but also at the material level, the United States is still inseparable from China's supply.

　　Even if the power lithium battery in the U.S. market can still purchase South Korean and Japanese batteries, in fact, including electrolyte, cathode and anode materials and other core materials of lithium batteries, related products of Chinese companies have also entered the supply chain of Japanese and South Korean battery companies.

　　Therefore, industry analysts believe that in the field of lithium batteries, the United States is currently strongly dependent on China's lithium battery supply chain, and does not have the ability to decouple from China's supply chain in the short term. Even if a series of bills and policies are passed, which increases the cost of Chinese companies entering the U.S. market, this is not necessarily a good thing for the U.S. itself. First, for example, in the field of energy storage, the U.S. energy storage market currently needs lithium iron phosphate batteries from China, and if the tariffs on batteries from China are raised, the U.S. energy storage owners will eventually pay for them; Second, in the field of power, although a considerable part of the batteries in the United States are purchased from South Korean and Japanese battery companies, from the perspective of the upstream supply chain, it will also use more or less minerals and raw materials supplied by Chinese companies, which essentially still depends on China's supply chain; Third, the increase in tariffs will undoubtedly hinder the application of globally recognized high-performance, high-safety, and cost-effective lithium iron phosphate batteries in the U.S. market, or will make the electrification of the United States relatively slow, and will reduce the global competitiveness of U.S. end owners.