China's demand for electric vehicle batteries surged in 2017 as automakers accelerated production of electric vehicles, according to the energy Trends unit of market research agency TrendForce. Global ev battery demand is expected to rise steadily from 2 billion batteries in 2017 to 2.5 billion batteries in 2018, up 24%.
China's rapidly expanding new energy market has prompted battery makers to focus significantly on electric vehicle batteries, even though their products used to be an important market for battery supplies. As a result, cobalt prices have been booming over the past year. Cobalt is a key ingredient in battery batteries. With rising costs and reduced government subsidies, China's new energy vehicle (NEV) market may face potential risks of future rise.
DuffLu, research manager at EnergyTrend, said cobalt prices will rise in 2017 due to the rapid development of batteries. Lu does not expect cobalt prices to rise further in 2018, but it remains a key issue for the supply chain. In the long run, battery makers and automakers will seek solutions, such as vertical integration, to ensure safe supply to prevent further large price fluctuations that could hinder the industry's development.
Enhanced energy density is driving the development of the NMC battery market
Before 2017, China's market demand for electric vehicle batteries mainly came from fixed lines and large-size buses, while energy intensity was not a top priority. Therefore, LFP batteries are important for the balance between cost and battery life.
In contrast, logistics vehicles and passenger cars mostly use NMC batteries. With the introduction of supportive policies by the Chinese government, the market penetration rate of new energy passenger vehicles is expected to increase significantly in 2018, leading to rising demand for NMC batteries. At present, the penetration rate of NMC batteries in passenger cars increased from 50% in 2016 to 70% in 2017, indicating that its market share in the passenger car market is higher than that of LFP batteries.
DuffLu said that as battery energy density increases, the unit price of electric vehicle batteries will continue to decline. Therefore, the improvement of cost performance will further promote the development of NMC battery market.
The rising penetration of new energy passenger vehicles and logistics vehicles has made them a key player in the Chinese market in 2018
Considering setting up charging stations and maximizing the convenience of vehicles in the early development stage of China's NEV market, the introduction of NEV started with large buses and then expanded to smaller vehicles. Currently, the penetration rate of small size (6-8 meters in length) and medium size (8-10 meters in length) buses is 27%, while the penetration rate of large buses (> 10 meters) is 20%.
In contrast, the development of electric buses is still in its early stages, with penetration only around 3%, mainly due to the high price of batteries and the initial development of charging facilities. In 2018, with expected additions, logistics vehicles and passenger vehicles will become important drivers of China's EV market, while the rise of new energy buses will stabilize.
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