China’s industry ministry has issued a fresh warning to battery manufacturers, urging them to rein in capacity expansion and address growing risks of overcapacity across the electric vehicle and energy storage sectors, underscoring rising concern in Beijing over disorderly competition and weakening profitability.
In a statement released on Thursday following a meeting earlier in the week, the Ministry of Industry and Information Technology (MIIT) said it had called on battery makers to optimise industry capacity, regulate competitive behaviour and strengthen oversight across the EV and energy storage battery supply chain. The statement was published on the ministry’s official WeChat account.
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The ministry said demand for energy storage batteries has surged, partly driven by the rapid global expansion of data centres and other power-intensive digital infrastructure. However, it warned that manufacturers had responded by “blindly expanding production capacity,” increasing the risk of oversupply, falling prices and industry-wide losses.
MIIT officials explicitly compared the situation to China’s solar industry, where years of aggressive capacity expansion led to sharp price declines, collapsing margins and widespread financial stress. That experience has become a key reference point for regulators seeking to avoid similar outcomes in other strategic manufacturing sectors.
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The warning reflects a broader shift in China’s industrial policy approach. While authorities continue to back advanced manufacturing, green technology and the energy transition, policymakers have increasingly emphasised quality, profitability and long-term sustainability over rapid output growth. Regulators have in recent months intensified calls to curb what they describe as excessive competition and redundant investment.
For battery manufacturers, the guidance points to closer scrutiny of new projects, stronger regulatory oversight and potential limits on expansion plans, particularly for smaller or less competitive firms. Larger and better-capitalised players could benefit if policy measures accelerate industry consolidation and help restore pricing discipline.
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In the near term, the ministry’s comments may weigh on market sentiment toward battery and EV supply-chain companies that have relied on aggressive capacity growth. Over the longer term, however, tighter controls on expansion could support more stable margins and reduce the risk of a solar-style price collapse, as China’s battery industry enters a more mature phase of development.