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Tesla is no longer the world’s foremost electric vehicle maker — a decline in last-year’s sales, disclosed on Friday, has left it second fiddle to China’s BYD. But cars aren’t the only territory Elon Musk’s company is attempting to stake out. For big batteries, Tesla may be able to put up a stronger fight.
Chinese battery makers have one major advantage: their products get cheaper every year. That’s helped them lap competitors in supplying power sources for electric vehicles: the country produces 75 per cent of the world’s lithium-ion batteries. Then there are the huge rechargeable batteries used by electricity grids. Chinese giants such as CATL have also made inroads there, but their position is not unassailable.
Energy storage systems are becoming a critical part of renewable power rollouts as solar and wind adoption grows. They store electricity when there is excess power on sunny or windy days, and grids increasingly depend on such batteries to stabilise frequency.
These systems used to be a niche business for global battery makers, which derived their fattest margins from making vehicles. But utilities and data centres have been deploying energy storage as core infrastructure. CATL, BYD and Eve Energy have been the biggest beneficiaries of this shift, as have system integrators such as Sungrow and Huawei.
CATL now accounts for nearly 40 per cent of the global market. In Europe, Chinese groups grew their share particularly fast in 2024, up two-thirds year over year, according to Wood Mackenzie data. Sungrow is leading the expansion, more than doubling its market share to 21 per cent.
Yet the US, the biggest customer base after China by installed capacity, has been an exception. Tesla dominates there with a 39 per cent share, despite Chinese rivals having a significant pricing advantage.
The reason for this American exceptionalism is that for grids, hardware is not the full package. Tesla sells a product that bundles kit, software, grid integration and long-term service into a single offering. Grid operators can’t take chances: they are providers of critical infrastructure and have lifespans of around 20 years. That makes warranties and accountability more important than incremental differences in battery cell costs.
Europe’s current openness to Chinese batteries may prove temporary for the same reasons. As storage projects grow in scale and batteries become more embedded, prices may become less important than integration capabilities and the provider’s record. Chinese makers will no doubt focus on warranties and integration too, but political risk works against them.
For now, Chinese makers still have a significant chance to gain more ground. They are improving technology rapidly and benefit from scale. But where electric car buyers seem increasingly willing to go Chinese, unhappily for Tesla, the giant battery market may follow a different path.
june.yoon@ft.com