China leads global lithium battery production. If we stick to electric cars in this Asian country manufactures 80% of the batteries who use these vehicles. CATL and BYD are the largest lithium battery manufacturers on the planet with a market share in February 2026 of 42.1% and 13.4% respectivelyaccording to the consultant SNE Research. Its leadership position is the result of several factors. On the one hand, China is the world’s largest producer of lithium and rare earthwhich are the main raw materials used in the manufacture of batteries.
In addition, it controls the processing of these materials and is capable of producing batteries on a large scale and at a very competitive price. However, in this recipe there is one more ingredient that we cannot overlook: BYD and CATL lead the global battery industry thanks to their capacity for innovation and adaptation. Both companies demonstrated this by betting before their competitors on lithium iron phosphate batteries (known as LFP by its English name). However, they have a weak point: they are deeply dependent on fossil fuels.
The natural gas paradox
Chinese battery manufacturers, and especially CATL and BYD, face a crossroads: their plants depend on natural gas to carry out thermal processes, making them vulnerable to geopolitical instability, such as that triggered by the iran war. Several thermal processes are involved in the production of a battery that require maintaining a constant and high temperature. One of them is the coating of the electrodes with a liquid mixture of active materials. And another involves the evaporation of solvents inside gigantic ovens.
Battery factories have been designed around gas boiler and pipeline systems
This last phase consumes an enormous amount of thermal energy, and currently gas boilers are the most efficient and economical way to produce the steam and heat that are necessary for these drying tunnels to fulfill their function. CATL has increased the use of wind and solar energy drastically, but the problem it has encountered is that electricity has not yet achieved effectively replace natural gas in processes in which large-scale heat production is involved.
And this gas delivers an amount of heat that is difficult to match using electrical resistance on an industrial scale. In addition, current factories have been designed around gas boiler and pipe systems, so changing the entire production infrastructure to an alternative that dispenses with natural gas and relies on electricity requires a huge investment that would force manufacturers to increase the price of batteries. In this scenario, their competitiveness would suffer.
As I mentioned a few lines above, the deep dependence that CATL and BYD have on natural gas exposes them to the instability of the global energy market. In fact, the increase in the price of gas as a consequence of the war in Iran is having a direct impact on the production cost per kWh. CATL is already working in a solution to this problem. Currently it appears that the best alternative to gas boilers is drying by directed infrared radiation, although gas today continues to provide much more energy than all the renewable and hydroelectric plants combined in the Chinese manufacturing ecosystem.
Image | BYD
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