BYD, NIO, Xpeng and other Chinese EV firms face slower growth, as higher metal prices push up battery costs
- The prices of lithium carbonate, cobalt and nickel, key metals used in EV batteries, have soared this year
- The rise in lithium carbonate alone would add an average US$470 to the cost of producing an EV battery, Suzhou Hazardtex executive says
Rising metal prices that result in more expensive batteries could hurt growth at China’s high-flying electric vehicle (EV) makers.
EVs are already more expensive than conventional cars because of high battery costs, and an increase in metal prices will force battery makers to raise prices and pass these on to carmakers and buyers, analysts said.
“The trend of falling battery prices has reversed this year and it will probably continue over the next few year. Higher battery prices will be a big stumbling block to the wide use of EVs,” said a senior executive who did not want to be named at Suzhou Hazardtex, an energy solutions provider that supplies specialised vehicle batteries.
Cheap batteries are key to growth and wider use of EVs. As battery costs came down from about US$1,200 per kilowatt-hour (kWh) to US$137 per kWh in 2020, a carmaker could save more than US$43,000 in costs on an EV with a 50 kWh battery, according BloombergNEF data.
A drop to US$100 per kWh – IHS Markit forecast earlier this year that prices would fall to this level in 2023 and drop further to US$73 per kWh by 2030 – could make even unsubsidised EVs more competitive against their petrol-guzzling peers.
However, the prices of lithium carbonate, cobalt and nickel – key metals used in EV batteries – have soared this year. The price of lithium carbonate has more than tripled this year to 210,500 yuan (US$3,304) per ton in China, while Cobalt has also more than doubled to more than US$68,000 a ton.
The rise in lithium carbonate alone would add an average US$470 to the cost of producing an EV battery, according to the Suzhou Hazardtex executive.
“EV battery prices will remain high in 2022, as a result of elevated metal prices due to increased demand amid the race to electrify the global vehicle market,” Fitch Solutions said in a report published this week, adding that higher battery prices this year and in 2022 will squeeze the profit margins of EV builders.
Major battery manufacturers such as Contemporary Amperex Technology (CATL), the biggest battery maker in China and globally, have yet to announce an increase in prices.
William Li, the CEO of Chinese EV start-up NIO, said on an earnings call last month that battery supply was the biggest bottleneck keeping the company from increasing sales. “Our major supplier, CATL, has invested to expand production, but the battery issue remains unsolved,” he said. “It is preventing us from growing fast.”
Sales of new-energy vehicles (NEVs) -pure electric, plug-in hybrid and fuel-cell cars – in China are this year already far ahead compared to 2020. Between January and November, NEV sales jumped 178.3 per cent year on year to 2.15 million units, representing 15 per cent of the country’s total, according to the China Passenger Car Association. Last year, NEVs made up only 5.8 per cent of total deliveries in China.
As EV firms ramp up production globally to keep up with carbon-neutrality goals, a total of 145 million battery-powered cars are likely to hit roads around the world in 2030, a huge jump from 10 million in 2020, according to the International Energy Agency.
Ryan Castilloux, the managing director of Adamas Intelligence, earlier this year forecast a “tsunami of demand” from EV manufacturers, which will add to the pressure on battery companies and their supply chains.