At the end of the day, local residents may feel disconnected from these batteries, and from the green energy transition they enable, because Hungarians are not the target consumers. Most lithium batteries produced in Hungary are destined for Western European car markets, where consumers are wealthier and already sold on the need to shift to clean energy. “The average Hungarian has the money to buy a 10-year-old used car from Germany, usually powered by diesel or gas. They don’t have the money to buy electric vehicles,” says Bartók.
Sluggish Demand
It’s worth keeping in mind that not all of the international deals announced by Chinese battery makers have panned out. Among the 68 factory investments we found, at least five of them have been paused or officially canceled, in some cases even after they had already begun construction. Part of that is because consumer adoption of EVs in these markets has proved to be a much more gradual process than in China.
Chinese battery makers planned aggressive global expansions at a time when governments were giving generous subsidies to factory projects and tax credits to consumers who bought electric cars, and they now have to recalibrate as that enthusiasm wanes. In the US, the Inflation Reduction Act passed under Joe Biden incentivized both Chinese and American companies to build factories, but then the EV subsidies outlined in the legislation were canceled under President Donald Trump. Even Europe, which previously set a goal to cease gas car production entirely by 2035, is now having second thoughts.
“Battery manufacturers, of course, would be less incentivized to make a big investment if they are not sure what the policy direction is,” says Alexander Brown, a senior analyst studying industrial policy at the Mercator Institute for China Studies.
What if the world doesn’t want EVs? Some battery companies are already deploying a backup plan: pivot to energy storage. Ford, which is building a massive battery plant in Michigan using CATL’s manufacturing technology, announced in December that it would shift from making EV batteries to producing those for energy storage. Envision AESC, another major Chinese battery company whose plans to expand in the US were on pause for most of last year, also recently announced its existing plant in Tennessee will shift from making EV batteries to storage batteries.
While some parts of the traditional car industry might be lobbying against EVs, everyone seems happy about having more batteries in grids and homes that can prevent power outages and even allow consumers to sell electricity back to the grid. (Well, at least almost everyone. The Pakistani national utility operator and the Chinese banks that lend money to it are not so happy about the rise of Chinese storage batteries, as another piece in our package expertly discussed.)
The good news at least is that energy storage technology has seldom been politicized. In the US, both deeply Democratic California and Republican Texas have become heavy adopters of grid-level battery storage, so Chinese ambitions for building more factories will likely not go completely to waste.
Reverse Technology Transfer
For the partner companies and governments working with Chinese battery makers to bring factories to their countries, the goal has always been clear: exchange market access and subsidies for the promise that these firms will eventually train local workers to produce state-of-the-art batteries on their own.
The irony here should not be lost on anyone who is paying attention to the global automotive industry. Over the last three decades, American, European, Japanese, and Korean automakers were happy to exchange their technological know-how for access to the Chinese auto market. But today, that relationship has been reversed.
