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“The Pain of Chinese Electric Vehicle Manufacturers”

As the global auto industry simultaneously decides to electrify their fleets in an effort to decarbonize the planet, the bet is made on the most promising premise: electric vehicle batteries (EVs). ) will become cheaper and cheaper. Unfortunately, that hasn’t happened recently for electric vehicle manufacturers around the world, especially China, when prices of the main raw material for battery production are at their post-pandemic high. lengthen. But the problem was made worse by Russia’s invasion of Ukraine, which raised prices for battery materials, such as nickel and lithium.

More than 20 electric vehicle manufacturers operating in China have raised prices this year for their flagship models, forced to do so due to soaring costs of raw materials used in EV batteries.

More than 20 EV automakers in China have raised prices this year alone as the cost of raw materials used in batteries soars.  Photo: @AFP.

More than 20 EV automakers in China have raised prices this year alone as the cost of raw materials used in batteries soars. Photo: @AFP.

The head of an electric vehicle startup said in a social media post: “The increase in battery costs has gone astray. The cost of raw materials is driving an ‘unreasonable’ increase in battery prices for electric vehicles,” said Li Xiang, CEO of Li Auto Inc, who took to social media in China to give a rare insight into the pain of vehicle manufacturers. electricity. Li Xiang also explained why the company raised the price of its Li One sports utility vehicle to 349,800 yuan ($54,950), an increase of 11,800 yuan.

Of course, Li Auto isn’t alone, as big-name car electronics maker BYD raised the price of its flagship Dynasty line in February and March. Tesla, which makes the Model 3 and Model Y in Shanghai Hai has done the same for both vehicles on multiple occasions since late last year. “Tesla & SpaceX are seeing significant inflationary pressure recently on raw materials and logistics,” CEO Elon Musk tweeted on March 13. The US electric vehicle maker has raised prices all models from 4-10% in the US in mid-March, and also increased prices in other markets including Japan.

Even SAIC-GM-Wuling Automobile, the maker of the low-cost 28,800 yuan Hongguang Mini, has increased the price of the EV by more than 10%. Many joint ventures producing EVs in China have simultaneously increased the prices of many models starting March 24.

The main reason is the battery, which accounts for about a third of the cost of electric vehicles. China’s Contemporary Amperex Technology (CATL), the world’s largest battery supplier, has raised prices twice since the end of 2021, according to Chinese media. CATL has released details on higher battery prices. Based on Chinese media reports, those price hikes could lead to an increase in the cost per single EV by 20,000 yuan ($3,140).

What drives the cost of EV batteries?

Rising prices of nickel and lithium, two important battery raw materials, are responsible for the upward trajectory of EV prices. In China, lithium carbonate traded above 500,000 yuan a tonne at one point in early March, according to a Chinese research firm, about six times more than a year earlier. Nickel prices also continued to increase in March 2022. Because Russia accounts for about 10% of nickel production and supplies 20% of the high-purity grade used for car batteries, the war only made the situation worse. Other key ingredients, including cobalt and nickel sulfate, have also seen significant price increases.

This rapid price increase is partly the result of growing demand for EV batteries in recent years, as China maintains the largest EV market in the world. While EV companies and battery manufacturers are ramping up production capacity, the domestic supply of lithium cannot keep up, so raw material costs skyrocket. Subsequently, the Russo-Ukrainian hostilities aggravated this situation.

Chinese government officials are expressing concern about these rising costs. “We are very concerned about the large increase in battery raw material prices, serious efforts should be made to solve them,” Xin Guobin, vice minister of China’s Ministry of Industry and Information Technology, said in a statement. an industry forum held in Beijing.

The prices of the two main battery materials, nickel and lithium, have been steadily increasing, thus leading to more expensive EVs.  Photo: @AFP.

The prices of the two main battery materials, nickel and lithium, have been steadily increasing, thus leading to more expensive EVs. Photo: @AFP.

Please add: “Serious steps will be taken to combat anti-competitive practices such as speculative trading. We will drive raw material prices back to reasonable levels. But there will be no fix. quick for the problem, as the supply of raw materials has not kept pace with the growing demand for electric vehicles”.

Some in the industry predict it will take at least a few months for the price of battery materials to stabilize. Others say it could take up to two or three years. Electric vehicle makers may be forced to raise prices even further, even if it means losing customers. Higher prices of EVs could hurt sales growth, with budget-conscious consumers staying away from expensive EVs, said a researcher from North China University of Technology. money.

China’s electric vehicle manufacturers are currently under pressure from rising costs and reduced government subsidies. The steeply rising costs of EV battery materials, especially lithium, are jeopardizing this booming industry. In other words, a bullish wave is covering the electric vehicle (EV) market of Chinaand is expected to reduce their sales in the world’s largest auto market.

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