After a two-year downturn, China's lithium battery supply chain is betting on a new wave of production growth, this time focused on higher-tech and rational expansion.
China’s lithium battery industry is initiating a new round of production expansion following a two-year period of deep adjustment and capacity reduction. Since April 2026, multiple A-share listed companies across the supply chain—from upstream lithium salts to downstream battery manufacturing—have announced significant new capacity plans.
Market participants widely believe this expansion is more rational than the speculative boom seen two to three years ago, according to a report from China's Securities Daily. The current wave is underpinned by improving supply-demand dynamics, an upgrade in demand for advanced battery structures, and a reshaping of the industry's profitability landscape.
This shift is exemplified by advancements from domestic producers like Ganfeng Lithium, which has begun small-scale production of a 500 Wh/kg solid-state battery. The company, a key supplier to Tesla and Volkswagen, is developing next-generation products that cater to demand for higher energy density, directly reflecting the "demand structure upgrade" cited as a driver for the expansion.
The renewed investment signals a potential end to a prolonged industry slump and is set to intensify global competition. As Chinese producers scale up higher-tech offerings, rivals in North America are focusing on supply-chain security. Vancouver-based Moment Energy, for instance, recently raised its total financing past $100 million to build a facility for repurposing old EV batteries, aiming to provide an alternative to the 90 percent of batteries that currently originate from China.
Rational Expansion Replaces Speculative Boom
The previous expansion cycle in China's lithium industry was characterized by what market observers called "blindly chasing growth" and "disorderly expansion." This led to a significant capacity surplus and a painful two-year consolidation that saw prices for lithium carbonate collapse.
In contrast, the 2026 expansion wave is directly tied to specific, evolving demand. This includes not only the sustained growth in electric vehicles but also the surging power requirements of AI data centers. This strategic alignment suggests companies are investing to meet tangible orders and technological shifts rather than simply adding generic capacity in a race for market share.
Global Competition Heats Up
The strategic divergence between Chinese and Western battery supply chains is becoming more pronounced. Ganfeng's progress in solid-state batteries highlights China's ambition to lead in next-generation technology. The company's lithium metal anode technology promises to increase energy density and safety, addressing key barriers to wider EV adoption.
Meanwhile, companies like Moment Energy are carving out a niche by tackling the challenge of battery lifecycle management and supply-chain dependence on China. By repurposing used EV batteries into commercial-scale storage, the company claims it can deliver systems for 30 percent less than new units. This strategy directly appeals to US and European buyers seeking to reduce reliance on Chinese imports for reasons of "energy security and digital sovereignty," according to Moment's CEO, Edward Chiang. This focus on recycling and repurposing creates a parallel competitive track focused on cost and sustainability, rather than solely on cutting-edge performance.
This article is for informational purposes only and does not constitute investment advice.
