Energy crisis boosts outlook for Chinese battery giants

March 26, 2026 (MLN): Chinese battery manufacturers are poised to remain key beneficiaries of the global energy transition, supported by their technological edge and cost leadership, according to Fitch Ratings.

The agency says supply disruptions linked to the Iran conflict are reinforcing energy-security concerns, prompting greater investment in renewables and battery energy storage systems (BESS), particularly in energy-importing economies.

Fitch notes that even a short-lived resolution to the Iran conflict is unlikely to dampen demand for BESS.

Higher and more volatile gas prices are making electricity generation less reliable in markets dependent on gas-fired power, accelerating policy focus on energy security.

This is expected to drive adoption of “solar-plus-storage” systems, especially in emerging markets that rely heavily on imported energy and lack stable power infrastructure.

Chinese manufacturers are well positioned to capture this growth, given their dominance in the lithium iron phosphate (LFP) battery segment and its supply chain.

While China’s domestic energy transition is already advanced, the next phase of growth is expected to come largely from overseas markets.

At the same time, demand for electric vehicle batteries outside China remains relatively subdued, in line with Fitch’s expectations, though new opportunities are emerging in commercial transport and industrial applications such as trucks, ships and construction equipment.

Global demand for BESS batteries has consistently exceeded expectations in recent quarters.

This has led some producers to redirect production capacity originally earmarked for electric vehicles toward energy storage systems.

However, profitability in the near term will remain sensitive to fluctuations in raw material costs, particularly lithium.

While manufacturers can typically pass these costs on to customers, margins may still face pressure. Larger producers are better equipped to manage this through scale efficiencies, stronger bargaining power and tighter cost controls.

It is also warned that rising trade barriers and localization policies could complicate the sector’s growth. Chinese battery makers face tariffs and regulatory challenges in the US, while Europe is increasingly encouraging domestic production.

In response, Chinese firms are expanding overseas through investments in regions such as Southeast Asia and Europe, although they are likely to retain more advanced technologies within China.

Despite these challenges, energy-security concerns are expected to provide a strong tailwind for demand, helping to offset risks such as a potential slowdown in China’s energy storage exports following the planned phase-out of export tax rebates by the end of 2026.

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