The price of power batteries and electric vehicles

Power Battery Conference on July 21, Zeng Qinghong, chairman of GAC Group, complained: "The cost of power batteries has accounted for 40% to 50%, or even 60% of new energy vehicles , so I am not giving Ningde era. Are you working?"

This statement has been continuously swiped on the Internet. He not only pointed out the current supply chain tension caused by rising raw materials for electric vehicles, but also put on the table the confusing relationship between electric vehicle manufacturers and battery suppliers. .

Regarding this statement, Zeng Yuqun, chairman of CATL, responded at the conference by saying: "The hype of upstream raw materials has brought short-term troubles to the industry chain." He pointed the finger at the increase in the price of battery raw materials.

The speeches of the two bosses were questioned by netizens.

Regarding the "part-time job theory" of the chairman of GAC, netizens responded: " Tesla , BMW and other big brands all purchase batteries, why can they make money?" "You are an integrator, and all the core technologies are owned by others. If you don’t invest in scientific research and just manufacture, you will be eliminated by society sooner or later; if you don’t understand the situation, you won’t even be able to work in the future.”

Regarding Zeng Yuqun's "capital hype theory", netizens did not let it go, and asked: "Aren't you the biggest hype and beneficiary yourself?"

Netizens responded sharply, but in fact they all expressed their dissatisfaction with the current price increase of electric vehicles. There is capital speculation behind it, but the bigger background is the imbalance between supply and demand caused by the rise in raw material prices against the backdrop of global inflation.

In the past ten years, the price of power batteries has dropped by 80% due to technological progress, but the price of electric vehicles has risen by about 80%. What is the reason for the perfect differentiation between the two?

01 The rise in raw material prices is temporary

Both car companies and battery manufacturers complained that they "didn't make any money", so who made the money that consumers spent on new energy vehicles?

Judging from the data, this year's round of electric vehicle price increases are mostly due to the increase in the price of upstream raw materials, and the profits have entered the upstream enterprises in the industry chain.

In the first quarter of 2022, the operating cost of CATL increased by 198.66% year-on-year, exceeding the operating income by 44 percentage points, and the gross profit margin was only 14.48%, hitting a new low in two years. This shows that, as a leading company in battery supply, although it has been criticized by vehicle manufacturers for rising battery prices, the gross profit of CATL is actually declining this year.

And lithium salt manufacturers generally earn a lot of money. Previously, Ganfeng Lithium announced that in the first half of 2022, the expected net profit is 7.2 billion to 9 billion yuan, a year-on-year increase of 408.24% to 535.30%. Tianqi Lithium also released its semi-annual performance forecast. It is expected that the net profit attributable to shareholders of listed companies in the first half of 2022 will be 9.6 billion to 11.6 billion yuan, an increase of 110 to 134 times year-on-year.

The entire industry chain has fallen into the curse of "working for the upstream", which has also led to the phenomenon that car manufacturers are deploying to battery manufacturing, and battery manufacturers are deploying upstream mineral raw materials.

Electric vehicles, on average, concentrate 51% of their cost on their powertrain compared to the cost of an ICE vehicle, which only accounts for 18% of the cost of an ICE vehicle .

The current mainstream of battery-powered cars uses lithium-ion technology, and the reason lithium-ion batteries are so expensive is because the rare earth metals such as lithium, cobalt and nickel—the materials needed to make them—are not readily available. Especially in the context of the impact of the epidemic and the Russian-Ukrainian war, the global supply chain has been disrupted.

Specifically, the prices of raw materials including lithium, nickel, cobalt, lithium hexafluorophosphate , separators and even graphite are soaring.

According to data from the China Automotive Power Battery Industry Innovation Alliance, from January 2021 to March 2022, the average price of cathode ternary lithium materials soared from 124,000 yuan/ton to 368,000 yuan/ton, an increase of 196. 8%; the average price of lithium iron phosphate materials rose from 40,000 yuan/ton to 162,000 yuan/ton, an increase of 305%.

To offset the soaring cost of materials used in large batteries, battery makers raised prices first, followed by automakers.

02 The power battery has fallen by 80% in the past ten years

The rise in power battery prices due to rising raw material prices should be short-lived. Judging from the history of the past ten years, the price of power batteries has been falling. Since 2010, the average price of a lithium-ion EV battery pack has dropped from $1,200 per kilowatt-hour (kWh) to $132/kWh in 2021. Since 2012, the average total cost of electric vehicle batteries has fallen by nearly 90 percent.