Rising raw material prices have led to rising prices for new energy vehicles, and the industry is calling for intervention measures

Since March, nearly 20 new energy vehicle companies have announced price increases, involving nearly 40 models, including brands such as Tesla, BYD, Xpeng, Leapmotor, Nezha, and Great Wall Ora.

Dong Yudong, CEO of Great Wall Motors' Ora brand, said in an interview with the Securities Daily: "The price of lithium iron phosphate has increased by 100,000 yuan per ton. Based on 60 kWh of electricity, the cost of a whole vehicle will increase by about 3,500 to 4,500 yuan."

While new energy companies are complaining that the price of raw materials is too high, new energy battery manufacturers are also saying they can’t afford it. A person from CATL responded to the reporter: “Due to the sharp increase in upstream raw material prices, the company has adjusted the prices of some battery products accordingly.”

In view of the sharp rise in prices of power battery raw materials, on March 26, Xin Guobin, Vice Minister of the Ministry of Industry and Information Technology, stated at the China Electric Vehicle 100 Forum that the current sharp price increases of power battery raw materials need to be highly concerned and seriously studied and resolved.

Zhang Xiang, a researcher at the Automotive Industry Innovation Research Center of North China University of Technology, told reporters: "The price increase of raw materials may have a certain impact on the sales of new energy vehicles this year. It is recommended that relevant departments of our country introduce relevant policies and measures to solve the price increase problem, especially resolutely crack down on unfair competition such as hoarding and speculation. Referring to the chip speculation last year, some companies in Shanghai and Shenzhen hoarded chips and sold them at a price increase of more than 40 times, and were fined. In response to the price increase of raw materials for power batteries this time, it is recommended that relevant market departments collect evidence to punish relevant illegal companies."

Lithium carbonate manufacturers: Hope to introduce intervention measures

"The current price increase of raw materials is indeed a bit unreasonable." Zhang Xiang told reporters: "The price increase of raw materials is due to the increase in demand for power batteries driven by the growth in sales of new energy vehicles. On the other hand, the demand for energy storage batteries is also relatively large. my country has proposed the 'dual carbon' goal. Industries such as steel, cement and petrochemicals now need to be clean, and clean energy such as photovoltaic power generation and wind power generation require energy storage. The demand for batteries for energy storage is also relatively large, which further exacerbates the contradiction between supply and demand of battery raw materials."

According to data monitoring by Sino-Trade, the prices of industrial-grade and battery-grade lithium carbonate are still in a sharply rising range in the first quarter of 2022, with a price increase of about 80% in three months. According to the latest data, the comprehensive market quotation of industrial-grade lithium carbonate is around 445,000 yuan to 490,000 yuan per ton, and the comprehensive market quotation of battery-grade lithium carbonate is around 490,000 yuan to 510,000 yuan per ton.

The surge in lithium salt product prices has made upstream manufacturers lucrative. Among them, Ganfeng Lithium achieved a year-on-year increase of about 1,000% in net profit after deducting non-operating expenses from January to February 2022. Tibet Mining, the most upstream lithium mining company, expects its net profit in the first quarter of 2022 to increase by 398.08%-647.12% year-on-year.

Li Liangbin, chairman of Ganfeng Lithium, told the Securities Daily reporter: "The most fundamental reason for the rise in lithium carbonate prices is the imbalance between supply and demand. If demand does not fall and supply does not increase, it will be difficult to effectively reduce the price of lithium carbonate. The effect of administrative regulation to achieve price recovery remains to be seen."

A relevant person in charge of a leading lithium salt company who did not want to be named told reporters that the price of lithium carbonate has continued to rise since the second half of 2021, mainly due to the mismatch between market supply and demand. "The downstream has driven the rapid recovery of industry demand, and midstream companies have rapidly expanded production, while the upstream cannot match the expansion rhythm of the midstream and downstream. Resource prices have accelerated, further promoting the increase in midstream product prices."

In addition to the above-mentioned claim of market supply and demand mismatch, there is also a view that the recent rise in lithium carbonate prices has gone off track and is related to price gouging by middlemen.

Zhang Xiang believes that the price of lithium carbonate in March this year has increased by more than 30% compared with February, which is a bit abnormal. The information of the entire lithium salt industry is not transparent, and some middlemen are hoarding goods at high prices, which is also one of the reasons for the current price surge. After all, companies have limited information, and there are many lithium carbonate companies, and a lot of information is not disclosed. Therefore, it is very necessary for regulators to step in, because regulators have more data resources, and matching supply and demand can help get a reasonable price.

In addition, Qi Haishen, president of Beijing Teyi New Energy, said in an interview with a reporter from Securities Daily that it is highly likely that the price of lithium will remain high at around 500,000 yuan per ton in the next few years unless there is policy intervention.

"We also hope to achieve win-win development of the industry, and the company will actively cooperate with the relevant requirements of the Ministry of Industry and Information Technology." Li Liangbin said.

Lithium carbonate giant accelerates expansion of lithium salt production capacity

In the opinion of industry insiders, to solve the above problems, companies need to strengthen their production capacity layout and increase supply to balance prices. In the past, lithium ore was mainly imported, especially from Australia. However, the price of lithium ore has increased by 5-6 times in the past year, resulting in very high costs for lithium carbonate manufacturers.

Public data shows that in 2021, the price of lithium carbonate in China rose from 50,000 yuan/ton at the beginning of the year to 500,000 yuan/ton at the end of the year. China consumed 300,000 tons of lithium resources in 2021, and imported and produced about 330,000 tons of lithium resources that year. It is estimated that in 2025, China's demand for lithium carbonate will reach 600,000 tons.

Yuan Shuai, deputy secretary-general of the Rural Revitalization Construction Committee of the China Cultural Management Association and a researcher on the development of new energy industries, believes that in order to ensure the supply of lithium resources, it is necessary to accelerate the development of domestic lithium resources to reduce my country's dependence on overseas lithium resources and achieve independent control of the entire industrial chain. At the same time, it is also necessary to encourage companies to make breakthroughs in related technologies, especially in the field of lithium extraction from salt lakes, so that the problem of rapid increases in raw material prices will be improved.

In terms of buying mines, Ganfeng Lithium has currently acquired equity in nearly 20 companies including Wuxi New Energy Lithium, International Lithium Ireland, and Lithium Americas, and holds high-quality mineral resources in Australia, Argentina, Mexico, Ireland, Qinghai and Jiangxi in China.

Li Liangbin told reporters frankly: "The current lithium mining situation in various places is different. I hope to open up the exploration and mining of domestic lithium resources so that these resources can be released as soon as possible."

Jiangte Electric, which owns many lithium mines in the "Asian Lithium Capital", has focused on promoting the "exploration to mining" of local lithium mines. The company said that if the mining scale of Qiankeng lithium mine reaches 3 million tons per year in the future, the corresponding lithium carbonate equivalent will be about 20,000 tons.

The competition for lithium resources has intensified, and grabbing and locking up mines has become a must for many large companies with strong capital. In the case of relatively limited lithium resources and unsynchronized and unsmooth mining cycles, facing strong demand from downstream, price increases and expansion have become the new normal for the industry.

Battery giants take multiple measures to cope with rising raw material prices

Although lithium carbonate giants have accelerated the expansion and development of lithium mineral resources, the current high price of lithium carbonate has been transmitted to lithium battery companies.

CATL was exposed to have raised the price of its batteries twice, with the cumulative increase reaching 20,000 yuan. In this regard, CATL admitted to reporters that the main reason for the price increase of batteries was the sharp increase in the price of upstream raw materials.

In this regard, Mo Ke, founder and CEO of True Lithium Research, told reporters that most lithium battery companies had raised prices either explicitly or implicitly before, and CATL was the last battery manufacturer to raise prices last year. CATL relied on its leading position, technological scale advantages to cope with the cost pressure from upstream price increases.

Data from Gaogong Lithium Battery shows that price increases have spread across the power battery industry chain since the beginning of this year. From the beginning of this year to the end of February, power battery prices have generally increased by more than 15%, and some manufacturers have increased prices for customers by 20% to 30%. Since the beginning of this year, the cost of power batteries has increased by at least 50% compared to last year.