After driving down prices, China is slowing down new battery factories due to concerns that there are too many.

07/09/2026 11:00

Updated to

07/09/2026 11:00

China has been building battery factories at a pace that is hard to match for years. Now it is facing the opposite problem: there might be too many. Authorities have temporarily suspended approval for new plants intended to produce batteries for energy storage while reviewing both existing capacity and projects still under consideration.

The measure, announced by the Chinese financial media outlet Cailianshe, focuses specifically on facilities for producing battery cells. Projects that have not yet begun construction are suspended for now, while factories already under construction can proceed. The policy may also be revised once the review is complete. Notably, this decision comes at a time when global demand for stationary batteries continues to rise.

China has been manufacturing so rapidly that prices have become a problem

Battery storage is expanding as solar and wind power generation increases, with grids needing to store electricity for use hours later.

However, China has built production capacity even faster. The outcome is quite similar to what happened earlier with solar panels and electric cars: many manufacturers competing for orders, prices dropping steadily, and profit margins shrinking to difficult-to-maintain levels. The problem lies precisely in the pressure caused by fierce competition and falling prices.

In addition, companies from the photovoltaic sector have also aggressively entered the storage market in search of new sources of growth after facing their own overcapacity crisis.

For consumers, cheaper batteries always seem like good news. For the industry, not necessarily. If prices drop to the point where factories can barely make a profit, closures, consolidations, and projects that lose economic viability occur.

The same problem that already appeared with electric cars

The situation is particularly interesting because China is trying to address a phenomenon it is well familiar with in the battery sector.

The electric vehicle industry has been subjected to extremely aggressive price wars for years, while the photovoltaic sector accumulated capacity far exceeding demand. Now Beijing seems determined to prevent storage from following exactly the same path.

China has already taken other measures to rationalize the sector, including imposing taxes on lithium-ion batteries and solar cells.

Europe relies on those cheap batteries

And here lies the consequence for Spain and Europe. A large portion of Europe’s major energy storage BESS projects use cells, batteries, or equipment manufactured in China, either directly or indirectly. Over the past few years, this massive industrial capacity has helped drive down installation costs rapidly.

If Beijing manages to curb new investments and balance supply and demand, that price decline might start to slow down.

This doesn’t mean batteries will automatically become more expensive. China’s installed capacity remains enormous, and competition will continue to be fierce. But the message is significant: China produced so much that it was able to lower battery prices quickly; now it’s starting to worry that producing even more may no longer be a good business move.