U.S. Tariff Hikes Expected to Boost ESS Installation Capacity

The new tariffs imposed by the U.S. target several sectors, including steel and aluminum products, semiconductors, electric vehicles, lithium-ion batteries and their components, critical minerals, solar cells, harbor cranes, and medical products. The tariff rates range from 25% to 100%, with electric vehicles experiencing the largest increase, quadrupling their previous rate. These tariffs will take effect starting in 2024 and 2026.

For lithium-ion batteries, the tariff increase distinguishes between those used for electric vehicles and those for other purposes.

1. Lithium-ion batteries and battery components: The tariff rate on these items will increase from 7.5% to 25% in 2024.
2. Non-EV lithium-ion batteries: The tariff rate on non-EV lithium-ion batteries will rise from 7.5% to 25% in 2026.

In 2023, electric vehicles, solar cells, and lithium-ion batteries have emerged as the new holy trinity of China’s export products. Their combined export value has reached 1.06 trillion yuan, with lithium-ion battery exports alone amounting to 0.461 trillion yuan (65.007 billion USD as of December 29, 2023). This increase in tariffs will significantly impact lithium-ion battery exports.

According to customs data, from 2022 through the first quarter of 2024, the United States has been the top destination for China’s lithium battery exports. In 2023, China’s lithium battery exports to the U.S. reached $13.549 billion (approximately 97.9 billion yuan), representing 20.8% of total exports. Fujian Province was the largest source of these exports, shipping 694,600 tonnes and accounting for 29% of the total export volume, with a value of $18.279 billion. The primary contributors to this volume were CATL and ATL. Guangdong Province followed, with 557,000 tonnes (23% of the total) and an export value of $15.709 billion.

Chinese companies hold a significant competitive edge in the global market for energy storage batteries. In 2023, data indicates that China’s lithium-ion energy storage battery shipments accounted for 92% of total global shipments. Notably, the tariff changes on EV batteries will take effect in 2024, while the changes on non-EV lithium-ion batteries will be delayed until 2026.

On April 25th, the International Energy Agency (IEA) released the World Energy Transition Special Report – Batteries and the Secure Energy Transition. The report emphasizes that the rapid expansion of the battery industry is crucial for meeting the climate and energy security goals set by COP28. Energy storage battery deployment in the power sector doubled compared to the previous year. However, to meet the global 2030 target, the battery industry must expand significantly to increase global installed energy storage capacity sixfold. In 2023, the battery industry grew faster than all other clean energy technologies. Declining costs, innovations, and supportive industrial policies are driving increased demand for batteries

On April 25th, the International Energy Agency (IEA) released the World Energy Transition Special Report – Batteries and the Secure Energy Transition. The report emphasizes that the rapid expansion of the battery industry is crucial for meeting the climate and energy security goals set by COP28. Energy storage battery deployment in the power sector doubled compared to the previous year. However, to meet the global 2030 target, the battery industry must expand significantly to increase global installed energy storage capacity sixfold. In 2023, the battery industry grew faster than all other clean energy technologies. Declining costs, innovations, and supportive industrial policies are driving increased demand for batteries

China’s lithium-ion batteries have significant competitiveness and cost advantages globally. Domestic battery companies have long outpaced their U.S. counterparts in both technology and production costs. In response to current and potential future U.S. policies, leading Chinese battery companies have been proactive. They are expanding their overseas capacity and implementing localization strategies by constructing factories abroad to maintain their competitive edge.

Major Chinese enterprises such as CATL, EVE, AESC, and Gotion High Tech already have capacity plans in the United States, with a combined planned capacity nearing 200 GWh. As these overseas production capacities are gradually realized, the global competitiveness of Chinese lithium battery companies is poised to increase further.