BEIJING
China has temporarily halted approvals for new power and energy-storage battery manufacturing plants pending a year-end capacity review. The moratorium targets projects in planning stages; facilities already approved or under construction will proceed.
The policy responds to acute oversupply. Between January and July 2026, China approved approximately 100 battery expansion projects totaling 2,608.5 gigawatt-hours of annual capacity. This alone exceeds China's entire 2025 battery output of 1,755.6 GWh—a 49 percent overhang before year-end additions materialize.
Regulators issued two capacity warnings earlier in 2026, signaling escalating concern. The halt mirrors Beijing's attempt to prevent a repeat of the solar industry collapse, where rapid factory expansion triggered brutal price wars that eroded margins across leading manufacturers despite China's continued global dominance.
Morgan Stanley analysts, led by Jack Lu, assess the crackdown as capacity-rationalization rather than growth suppression. "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," the firm said. The distinction matters: consolidation benefits manufacturers operating near full capacity utilization while pressuring smaller competitors with idle facilities.
