BEIJING — As the 2026 Two Sessions unfold, multiple deputies and members are prescribing remedies for the lithium battery industry's intensifying "involution-style" competition and overcapacity woes. From establishing dynamic capacity control systems to curbing below-cost bidding and establishing "digital passports" for safety, policy-level interventions are aligning with market forces to steer the industry out of its vicious cycle.

Prescription 1: Dynamic Capacity Control

To address unchecked expansion, Zhang proposes a dynamic capacity control system. Relevant ministries should monitor national battery capacity, utilization rates, and demand via big data, regularly releasing overcapacity warning indices and restricting outdated technologies and inefficient capacity. Regional development plans should be formulated based on resource endowments and industrial clusters to avoid redundant construction .

On entry-exit mechanisms, he suggests raising market access thresholds for battery production and recycling, transitioning from a "licensing" system to a ministerial "filing" system, and revising the "Battery Industry Standard Conditions" to bar low-level capacity .

Prescription 2: Curbing Low-Price Bidding

Vicious low-price competition has become endemic. Zhang noted that some companies quote below-cost prices in project bids, triggering a vicious cycle of "dumping-profit decline-quality degradation" .

He recommends improving the Bidding Law and Government Procurement Law, establishing a price anomaly warning mechanism, and formulating measures to identify and penalize malicious low-price competition and monopolistic bidding. Special rectification campaigns should target counterfeit and shoddy products to secure the industry's safety bottom line .

Notably, in January, four ministries summoned 16 leading companies including CATL and BYD for closed-door meetings pledging to strengthen market supervision and curb price wars . These Two Sessions proposals aim to institutionalize that policy direction.

Prescription 3: Breaking Local Protectionism

The biggest obstacles to a unified national battery market, according to Zhang, are two-fold: invisible barriers from local protectionist policies that "hinder factor flow," and inconsistent foundational market rules that increase compliance costs across provinces .

He urges unifying foundational market systems, dismantling regional segmentation, and abolishing local protectionist policies in NEV layout, application scenarios, and subsidies. Factor markets should be unified to facilitate free flow, accelerating the construction of a unified national power market and consistent energy storage policies .

Prescription 4: "Digital Passports" for Global Rules

With the EU's New Battery Law taking effect, lifecycle management has become a new competitive frontier. Zhang suggests accelerating China's battery digital ID system, establishing "digital passports" for battery packs to ensure traceability, address safety risks, and gain global standard-setting influence . For waste lead-acid battery recycling, he proposes a closed-loop system through joint law enforcement and转运 centers .

Outlook

From capacity reduction to rule reconstruction, the 2026 Two Sessions are prescribing a systematic governance remedy for the lithium battery industry. As the "visible hand" of policy exerts precise force, the "invisible hand" of the market can return to rationality. For companies in pain, adapting to this governance logic will determine their survival in the next industry reshuffle.