China halts new battery factories on capacity concerns: Report

BEIJING – China has temporarily suspended construction of new projects to manufacture power and energy-storage batteries, pending a year-end review of industry capacity, Caixin reported. Projects already approved or under construction are expected to proceed, while those still in planning stages could be suspended, according to a separate report from Shanghai Securities News.The move comes after regulators twice warned manufacturers earlier in 2026 to avoid excess capacity growth. Officials are trying to ensure the sector avoids the fate of China’s solar industry, which dominates global manufacturing but has seen its top companies lose billions of dollars after a rapid build-out of factories outpaced growth in demand and led to vicious price wars. About 100 new battery expansion projects were signed between January and July, with combined annual capacity of about 2,608.5 gigawatt-hours, Caixin reported. That exceeds the 1,755.6 GWh of total output recorded in 2025, according to the report.Morgan Stanley analysts including Jack Lu expect the crackdown to benefit manufacturers who use most of their capacity.Contemporary Amperex Technology had a 95 per cent utilisation rate in the first half of 2026, the bank said, compared to the industry average of 65 per cent. “If implemented consistently, the policy could accelerate industry consolidation, improve utilisation rates, and support a more rational competitive environment across both the EV battery and energy storage markets,” Morgan Stanley said. BLOOMBERG