Amid the price war of new energy vehicles, a new round of cost reduction for power batteries is "imminent"

This round of price war has sent a signal to the upstream supply chain that there is still room for battery cost reduction.

At the beginning of the Year of the Dragon, BYD fired the first shot in the price war for new energy vehicles.

On February 19, BYD announced the launch of two plug-in hybrid models, the Qin PLUS Honor Edition and the Destroyer 05 Honor Edition, with a starting price of 79,800 yuan. Compared with the previous version of the Champion Edition, the price of the new version has dropped by 20,000 yuan.

Subsequently, brands such as SAIC-GM-Wuling, Changan Qiyuan, and Nezha Auto followed suit and announced price cuts for their related models.

On February 23, BYD continued to escalate its price war and launched the Dolphin Glory Edition of its pure electric sedan. Compared with the previous official guide price of 116,800 yuan, the price of the Dolphin Glory Edition has dropped significantly, ranging from 99,800 yuan to 129,800 yuan.

Industry insiders said that in this round of price war, power batteries, which account for the largest proportion of electric vehicle costs, have become the focus of automakers' cost control.

On the one hand, automakers like BYD that have the ability to develop their own batteries can control battery costs, dig deep into the supply chain, and dilute costs through scale;

On the other hand, car companies that do not have their own battery production lines are also beginning to have more say and are lowering battery prices through business bargaining strategies.

For the power battery industry, with the start of this round of price war for new energy vehicles, "extreme cost reduction" will still be the keyword in 2024.

On the premise of ensuring quality, how power battery companies can achieve lower prices and occupy more market share through manufacturing process upgrades, technological innovation, supply chain management and other means is the key to coping with the industry reshuffle.

A new round of cost reduction is "imminent"

Gaogong Lithium Battery learned that the primary reason for the start of this round of price war is that as the growth rate of the terminal consumer market slows down, new energy vehicle companies are looking for a broader incremental market.

At present, the core models of passenger cars in the country are concentrated between 50,000 and 150,000 yuan, and traditional fuel vehicles account for the largest proportion in this major market.

This means that new energy vehicles priced between 50,000 and 150,000 yuan will become the mainstream products that drive sales growth, and are also the most competitive battlefield for automakers. Therefore, the models that are subject to price cuts in this round are all concentrated in this price range.

For car companies, price cuts will seize more market share for traditional fuel vehicles, stimulate terminal market sales of new energy vehicles, and further increase their market share.

BYD also expressed that it hopes to further accelerate the trend of oil-to-electricity transition in the automotive industry through this price cut and speed up the transformation of the entire new energy vehicle industry.

At the same time, Gaogong Lithium Battery learned that the bargaining power of batteries has gradually shifted to car companies, which is also an important factor influencing car companies to start this round of price cuts.

On the one hand, China's power battery capacity utilization rate will drop from over 75% in 2022 to an average of less than 65% in 2023, and the industry will enter a state of overcapacity, with a large amount of inventory backlog at the end of 2023;

On the other hand, the price of lithium carbonate has been falling all the way, from 600,000 yuan/ton to the current 100,000 yuan/ton or so. The marginal impact on the cost of power batteries has weakened, and battery companies are facing huge risks of inventory depreciation.

Industry insiders revealed that under this background, some battery companies may even choose to "cut off their own arms" and sell off their existing inventory at a loss to reduce losses; as for downstream car companies, more and more customers are abandoning the linkage mechanism of lithium carbonate and adopting bargaining to reduce battery costs.

It is worth noting that whether it is battery companies actively selling their products at low prices, or car companies lowering prices after gaining the right to speak, the price of battery cells continued to decline in 2024 and is gradually entering the 0.3 yuan/Wh era.

For battery companies, cost reduction is the "golden rule" to gain a competitive advantage in such a fierce market environment.

In fact, battery companies have never stopped reducing costs, and this round of price war is a signal sent by car companies to the upstream supply chain - there is still room for battery costs to be reduced.

Three major "cost reduction" dimensions

At the Honeycomb Battery Day at the end of 2023, Yang Hongxin, Chairman and CEO of Honeycomb Energy, said that by 2024, Honeycomb will achieve cost control in three dimensions: manufacturing cost, procurement cost, and technology cost.

For the entire battery industry, these three dimensions are also the key to achieving ultimate cost reduction while ensuring quality.

In terms of manufacturing costs, battery companies are always concerned about how to improve the efficiency and yield of production lines, and constantly put forward new requirements.

In terms of efficiency, battery companies have deeply promoted domestic substitution of equipment and iterative upgrading of technological processes, which has set off an efficiency revolution in various manufacturing links (lithium battery production lines have "set off" an efficiency revolution).

In addition, a leading lithium battery equipment company revealed to Gaogong Lithium Battery that battery companies are currently paying more attention to the intensiveness of the battery manufacturing process. How to simplify the production steps and how to achieve higher integration of each process are the main directions of production line transformation.

In terms of yield, battery companies are not simply pursuing high yield, but are more focused on tracing the underlying factors that affect manufacturing yield and battery quality. This means that digitalization and intelligence play a more important role in battery manufacturing.

It is worth noting that relevant industry insiders said that for more mature production lines, the efficiency improvement is still within a certain range, and there is limited room for reducing manufacturing costs. The focus of battery cost reduction is still on procurement costs.

A previous internal notice from Fudi Battery stated, "In 2023, the procurement team maximized its profits through layers of screening, eliminating inferior products and retaining superior ones, and fully bidding. At present, there is still huge room for cost reduction in procurement."

Yang Hongxin also said, "Purchasing costs and technical cost reductions must be reduced by 20%. In 2024, we hope to reduce the cost of raw material procurement by 15%-20%."

In terms of procurement cost reduction, battery companies will continue to advance cost control on equipment procurement, which has also promoted the overall domestic substitution of lithium battery equipment and gradually spread to core components such as lasers and coating die heads.

As for material procurement costs, industry insiders revealed that there is still room for a 30% reduction in material costs in 2024. Among them, positive electrode materials, which account for 40% to 50% of battery costs, are expected to drop to 30% in 2024.

In terms of technical costs, technological trends represented by blades and 46 series large cylinders are important ways for power battery companies to reduce costs.

In terms of blade batteries, following the dragon scale battery solution, Honeycomb Energy takes the short blade battery cell + flying stack technology as the core to fully support the innovation and upgrade of battery fast charging performance;

For the 46 series large cylinder, lower costs can be achieved by combining ultra-high nickel positive electrode and silicon-carbon negative electrode, and reducing the electrode production process using dry electrode technology.