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China's Ministry of Industry and Information Technology has warned battery manufacturers to limit capacity expansion due to rising risks of overcapacity in the electric vehicle and energy storage sectors. The ministry's statement follows a meeting where officials emphasized the need for optimization of industry capacity and regulation of competitive behavior.

Demand for energy storage batteries has surged due to the growth of data centres; however, unchecked production increases could lead to oversupply and financial losses. The ministry drew comparisons to the solar sector's past issues with overcapacity and price declines.

This warning signals a shift in Beijing's industrial policy, focusing on quality and sustainability rather than just output growth. Battery makers may face tighter scrutiny and potential constraints on expansion, benefiting larger firms while impacting sentiment toward battery and EV supply-chain stocks. This intervention reflects Beijing's aim to balance strategic goals with financial stability as the battery industry matures.