Judging from the current situation, the crazy price increase of battery raw materials will sooner or later spread to OEMs.
Recently, Nikkei Asia reported that the price of electric vehicle batteries may rise in 2022 after a decade of sharp declines as supplies of lithium and other raw materials cannot keep up with ballooning demand.
In fact, news of battery price increases began to circulate in late 2021. In October last year, the outflow of a BYD "Battery Price Increase Contact Letter" caused a sensation in the industry. The liaison letter shows that BYD Lithium Battery Company has decided to increase the unit price of CO8M and other battery products, and the unified increase will not be less than 20%, which will be implemented from November 1 last year.
Coincidentally, it is reported that many battery companies have released their own price increases or signals like price increases last year.
On October 9, raw material supplier Ganfeng Lithium issued a price adjustment letter, announcing an increase of 100,000 yuan per ton for the full range of metal lithium products. On October 17, Penghui Energy issued a price increase letter, listing various raw material projects and recent price changes, and stated that the price of raw materials was also seriously out of stock, and most material suppliers required cash to pick up the goods and still could not guarantee the supply.
On October 18, Guoxuan Hi-Tech issued a price adjustment negotiation letter. Guoxuan Hi-Tech said that with the rising prices of cathode materials, electrolytes, copper foils, aluminum foils, etc., the company has done its best to reduce the impact of rising costs, but the results have been minimal, so the company plans to carry out orders that have been signed by both parties. Second consultation.
Unsurprisingly, their reasons for raising prices are all due to rising raw material prices. So how terrible is the price increase of raw materials, so that these small battery companies are forced to increase their prices?
The following are the prices of lithium metal, lithium carbonate and lithium iron phosphate observed by First Electric in Longzhong Information from December to the present, and made into a line chart for your reference:
Not only that, but cobalt and nickel prices have also been skyrocketing. The price of cobalt has doubled since January 2021 to $70,208 a tonne, while the price of nickel has jumped 15% to $20,045.
To increase the price or not to increase the price? How do battery companies choose?
Difficult!
As mentioned in BYD's letter, in 2021, lithium battery raw materials will continue to rise, the price of cathode material lithium cobalt oxide will increase by more than 200%, the price of electrolyte will increase by more than 150%, and the supply of negative electrode materials will continue to be tight, resulting in a substantial increase in comprehensive costs. In the price adjustment notice, Penghui Energy even made a list comparison of some raw material prices with large increases, in order to prove how much pressure is there for raw material prices to increase?
Taking Penghui Energy as an example, according to its latest three quarterly report, the operating income in the third quarter was 1.44 billion yuan, a year-on-year increase of 24%; the net profit was 45.6 million yuan, a year-on-year decrease of 35%.
Indeed, the current power battery cost increase is generally between 30%-40%, which has exceeded the gross profit rate of most power battery companies. If prices cannot be raised, most battery companies will have difficulty making money. Over time, survival may be a problem.
Of course, there are also battery companies with less pressure, such as CATL, and its gross profit does not seem to be affected by the increase in raw material prices. According to the third quarter financial report released by CATL, the company's gross profit margin has increased slightly compared with the second quarter.
Why the Ningde era can stand alone, because of strength. At present, Ningde era has almost cooperated with major car companies, so there is no need to worry about poor product sales.
Moreover, CATL has recently acquired or invested heavily in many domestic and overseas raw material companies including lithium, nickel, electrolyte, and positive and negative battery upstream raw materials, which can ensure the price increase of related materials to the greatest extent and reduce the impact on itself.
According to industry analysts, upstream raw material prices have skyrocketed, and downstream new energy vehicles are in strong demand. The power battery manufacturers caught in the middle do not have much bargaining power between the top and the bottom. The surge in upstream prices stems from a serious shortage of supply and demand, and there is no reason to cut prices. Downstream new energy vehicle manufacturers still maintain the control of the automobile industry's "complete vehicle is king", so it is difficult to negotiate prices, so power battery manufacturers have to silently suffer from upstream materials. pressure from rising prices.
Car companies: "waiting" is also a torment
Also difficult!
Although the OEMs have the power to control the "vehicle is king" in the auto industry, battery companies have increased their prices, so they can give up cooperation with them and develop their own batteries. Yes, this is a good method, but do self-developed batteries require no raw materials? BYD's self-research is not going to increase the price.
For car companies, if power battery companies can't bear the pressure to increase prices, there are two problems they will face first. One is to decide whether to continue to cooperate with the power battery company or to develop the battery in-house. It is certain that no matter which one you choose, the result will be a rapid increase in cost.
The second is whether the price of the whole vehicle will go up? Perhaps for manufacturers like BYD and Tesla, due to the strong base, the cost of rising battery prices can be evenly amortized by relatively high production and sales, and due to the brand effect, the consumer acceptance of price increases may be relatively high; but For some companies with average sales and a rising period, the tolerance of consumers is not so high, and rashly raising prices is almost like asking for a dead end.
It is understood that in response to the voice of power battery companies for price increases, the feedback from some OEMs is that they cannot accept the price increase of power batteries, but they are willing to ease the pressure on battery companies through other forms such as billing periods, binding cooperation, and financial cooperation. Some OEMs also indicated that they agreed to a slight increase in the price of batteries for new models.
In any case, this wave of price increases will inevitably affect many power battery companies and increase the pressure on OEMs. In serious cases, it may cause the elimination of a number of power battery companies.
