China's energy storage system (ESS) battery industry, which has grown explosively in recent years, faces the risk of oversupply. As warnings emerge in the industry that China's ESS battery production capacity could far exceed actual demand, Chinese authorities have also begun to manage blind capacity expansions and price competition. This has raised concerns that the vicious cycle of oversupply and price wars seen in the solar industry could spread to the ESS battery sector.
According to China Business News on the 8th, Tian Qingjun, executive vice president of Yuanjing Science and Technology Group, said at the "2026 World Power Battery Conference" held recently in Sichuan, China, that China's ESS battery expansion plans this year have exceeded 800 GWh. Production capacity to be completed by year-end is expected to reach 1.2–1.5 TWh, and total planned capacity is forecast to surpass 2 TWh. Tian noted that this level of capacity far exceeds actual demand in the global ESS battery market.
The problem is that it costs a considerable expense to halt or restart ESS battery production lines. Accordingly, if supply exceeds demand, corporations are more likely to lower prices and compete rather than reduce production. In particular, because a significant portion of Chinese-made ESS batteries is exported overseas, there is mention of the possibility that oversupply in China could lead to price competition in the global market.
According to global energy market researcher Wood Mackenzie, the global ESS supply chain is effectively controlled by China. As of the end of 2025, eight of the top 10 global companies are Chinese corporations, with China accounting for 76% of the global market. Meanwhile, demand has grown overseas to the point that 56% of the total occurs outside China. This is why there are concerns about global price competition stemming from Chinese companies' oversupply.
Against this backdrop, the Chinese ESS battery industry is expected to begin full-scale capacity restructuring over the next few years. An official at a Chinese ESS company told China Business News, "Over the next few years, the ESS industry will undergo a round of capacity restructuring," predicting that production lines for older ESS batteries below 314 Ah will gradually be closed or repurposed. The explanation was that battery corporations with weaker competitiveness will exit the market, and low-efficiency production lines will gradually be excluded from industry statistics, leading to restructuring across the sector.
The Chinese government has also recognized the problem and is moving to manage it. Wang Sizhang, deputy director general of the Department of Electronic Information at the Ministry of Industry and Information Technology, said at the conference the same day, "We must not ignore the risk of structural overproduction in the ESS industry," adding that responses to homogenization and excessive competition should be strengthened. Liu Min, chief engineer at the State Administration for Market Regulation, also pointed out that blind expansions and price undercutting in some areas are undermining the industry's sustainable development.
According to the report, the State Administration for Market Regulation is promoting a comprehensive management framework to prevent so-called "neijuan (involution, self-defeating competition)" in key industries such as lithium batteries. The plan is to curb excessive price competition through measures such as early warnings and adjustments for capacity, price competition regulations, and product quality control.
China Business News said, "The ESS industry's growth remains rapid, and at the same time, technology is gradually advancing, pushing the sector into a mature stage," adding, "The key ahead will be how to rationalize the rapidly surging production capacity."