Every lithium ion battery manufacturer in China is planning to reduce prices by as much as 40% this year as a result of changes in vehicle subsidy. Although, these price slashes might not affect the global markets, and according to Logan Goldie-Scot, the head of energy storage analysis at Bloomberg New Energy Finance, "The 40% price cut on the benchmark global prices might not be seen anywhere else."

Rather, every Chinese li ion battery manufacturer is slashing the prices on products sold within the country so as to make an account for electric vehicle subsidies reduction that came into effect in January. A BNEF analyst in Tokyo, I-Chun Hsiao said the subsidy in 2017 is a 30 percent lower steep than the subsidy in 2016 nationally and provincial subsidies are also in the process of being cut. It was discovered that subsidies in electric vehicles had allowed a couple of government-approved Chinese lithium battery makers have a field day with charging a premium for their products.

In 2016, state subsidy certifications were withheld from two big lithium battery manufacturers, Samsung SDI and LG Chem of South Korea, which narrowed the field of potential suppliers to the massive electric vehicle market of China. Also, SK Innovation, another battery OEM (original equipment manufacturer) from South Korea missed out on the certification managed by the Chinese MIIT (Ministry of Industry and Information Technology).

According to Hsiao, any Chinese li ion battery manufacturer whitelisted on the directory of MIIT has high pricing power and this is due to the fact that OEMs need to use their batteries or simply miss out on the crucial subsidiaries. Therefore, any lithium battery manufacturer that has been whitelisted has the power to set high prices. The only set that is expected to cut down their prices are the lithium ion players because the lead-acid battery makers are dependent on underlying commodity prices since lead accounts the highest percentage of the total cost.

Overall in 2016, China took credit for about half of all the sales of new electric vehicles in the world with the rush to get these vehicles on the roads have resulted to an aggressive charging station build-out program. Just in July of 2016, 81,000 installations were completed. The fall in the sales of cars is an apparent blow to China's vehicle electrification program with concerns that the makers were making money fraudulently from the subsidy scheme by using fake documents for vehicles that were still in their factories. In fact, in 2016, 5 companies that took about $150 million illegally from the scheme were investigated.

This has pushed some observers to speculate that the authorities in China could fast-track a zero emission vehicle mandate with the aim of eventually scrapping the scheme. At the moment, it is expected that the current mandated would commence anytime after 2020.

Meanwhile, observations are being made to see if the slash in lithium battery pack prices will cause a reverse in the stall of the sales of electric vehicles. It is not certain that the lower battery prices will result in sales of stationary energy storage in China. For the meantime, it looks like the price cut occurring among every li ion battery manufacturer in China are nothing to write home about this year.