Global EV battery oversupply reaches 3.4 times demand

The Nikkei recently learned that global production capacity for pure electric vehicle (EV) batteries has reached 3.4 times demand. This is due to an oversupply caused by a slowing EV market. While China, which has a certain domestic demand for EVs, continues to increase production, major battery manufacturers in Japan and South Korea have begun scaling back their investment plans. This unexpected oversupply poses a headwind to battery localization efforts in Japan and the United States.

The Nikkei (Chinese version: Nikkei Chinese website) compiled data from S&P Global Mobility, a US research firm. By 2025, global EV battery factory production capacity will reach 3,930 gigawatt-hours (GWh), while demand will be 1,161 GWh, a 3.4-fold increase. This supply-demand imbalance will continue until 2026 and is expected to reach 2.4 times demand by 2030.

Chinese companies hold 70% of the global market share for EV batteries. According to data from South Korean research firm SNE Research, based on market share from January to June 2025, China’s Contemporary Amperex Technology (CATL) ranked first, followed by China’s BYD.

Among Japanese and Korean companies, which once held a majority of the market share, South Korea’s LG Energy Solution ranked third and Japan’s Panasonic Holdings (HD) ranked sixth, but their market share continues to decline.

Governments in countries such as the United States and Japan have been encouraging domestic battery production to avoid dependence on China, driven by economic security concerns. However, with EV demand slowing more than expected, these measures appear to be backfiring.

In North America, in particular, there is a severe oversupply, reaching 4.8 times the market share in 2025. The Inflation Reduction Act (IRA), passed under the Biden administration, preferentially treated North American-produced EVs, leading to increased battery investment. The Trump administration rolled back the previous administration’s EV promotion policies, forcing companies to adjust their business strategies.

Panasonic Holdings has revised the full-capacity date for its new EV battery plant, which opened in the United States in July, to an unspecified date. The original target of the end of fiscal 2026 was for the plant to be fully operational. Panasonic believes that due to sluggish sales of Tesla, a major US customer, early full-capacity operations pose the risk of increased inventory.

Automakers are also reducing investment. Toyota has postponed construction of its battery plant in Fukuoka Prefecture. Honda has also delayed the start-up of its EV and battery plant in Canada by approximately two years.

Starting in 2024, when the EV slowdown begins to become apparent, oversupply will gradually surface. Goldman Sachs predicts that the average battery price in 2024 will be $111 per kilowatt-hour, a 26% decrease from 2023, and predicts that it may fall to around $80 by the end of 2026.

The battery industry is already undergoing a shakeout. Northvolt, a Swedish battery startup funded by Volkswagen and others, filed for bankruptcy in March. Despite this, Chinese manufacturers are still increasing their investment. European automakers will increase their reliance on Chinese batteries. CATL is expanding its investment in Europe, and BYD will strengthen production of low-cost batteries. The gap in production capacity and technology between Japan, the US, and Europe and China is likely to widen.