The tide of new energy vehicle price reduction is not far away?


Wang Jinyu

Recently, the price of lithium carbonate, a raw material for batteries, has fallen sharply, close to "waist cut". For a long time, the price of raw materials for power batteries, which has been high, has declined, which seems to bring room for electric vehicles to reduce prices. In the current fierce market competition, whether new energy vehicles will usher in a new round of price reduction has attracted attention.



Battery raw material prices plummeted

According to data released by Shanghai Steel Union, on April 4, the quotation of some lithium battery materials continued to fall, of which battery-grade lithium carbonate fell by 8,500 yuan / ton, and the average price was 224,000 yuan / ton. Half a month ago, on March 16, the price of battery-grade lithium carbonate was still 333,000 yuan / ton, and in the past half a month alone, the price fell by more than 100,000 yuan / ton, more than half of the highest point. Since the beginning of this year, the price of power battery raw materials has been declining, and this price reduction trend has continued momentum. Wang Yu, chairman of Funeng Technology, judged that the price of lithium carbonate will fall, "It is not impossible to detect below 100,000 yuan / ton." ”

Duan Debing, vice president and secretary general of the China Nonferrous Metals Industry Association, said that in the past three years, the price of lithium salt per ton has soared from more than 40,000 yuan to about 600,000 yuan in a short period of time, and then recently "slashed" at a high level in a short period of time, fluctuating greatly, and the current decline in the price of power battery raw materials, including lithium salt, is related to factors such as the slowdown in terminal demand for new energy vehicles. Analyzing the reasons for the decline in the price of lithium carbonate, Wang Yu believes that this is strongly related to the supply and demand impact of the new energy vehicle market. With the gradual mass production of sodium-ion batteries, the market demand for lithium resources has gradually declined. On the one hand, many companies in the industry have previously laid out the field of sodium-ion batteries, and the industrialization of sodium electricity is close at hand; On the other hand, in terms of market supply and demand, the power battery industry is facing the practical problem of high inventory. In recent months, affected by the relative sluggish new energy vehicle market, the power battery industry has experienced unexpected fluctuations, whether it is original material companies or battery companies, there are relatively high inventories. According to the latest report released by the research institute EVTank, China's power battery installed capacity in 2022 will be 294.6GWh, but shipments will be as high as 465.5GWh, while the annual power battery inventory of the entire industry chain will be as high as 164.8GWh. According to statistics from the China Automotive Power Battery Industry Innovation Alliance, in February, China's power battery products were 41.5GWh, while the installed capacity was only 21.9GWh, only half of the former.

While the price of raw materials for power batteries is declining, and battery companies are high in inventory, the new energy vehicle market has also ushered in fluctuations in production and sales. Affected by factors such as subsidy decline and fuel vehicle price war, the current new energy vehicle market performance is not as expected, so it will inevitably affect the demand for power batteries. The lack of demand will inevitably affect the price of power batteries, and in turn, will inevitably affect the price of new energy vehicles.

There is room for vehicle prices to fall

In the past few years, affected by the rise in the price of power battery raw materials and other factors, new energy vehicles have had several "price increases", and now the continuous decline in the price of power battery raw materials has undoubtedly provided space for new energy vehicles to reduce prices. In fact, the fluctuation of the price of raw materials for power batteries does have a great impact on the cost of new energy vehicles.

Li Bin, chairman of NIO, said that every change in the price of lithium carbonate of 100,000 yuan / ton will affect NIO's gross profit margin of about 2%, and if it drops to the level of more than 100,000 yuan per ton, it can release 8% of the gross profit margin. Zhu Jiangming, founder, chairman and CEO of Leapmotor, said frankly that for every 100,000 yuan / ton of lithium carbonate price drop, the cost of batteries can be reduced by 50 yuan per kWh, and 3,500 yuan can be saved by taking a 70-degree battery pack as an example. An Conghui, CEO of Zeekr also said that for every 10,000 yuan / ton reduction in the price of lithium carbonate, the contribution to the cost of Zeekr new energy vehicles is 575 yuan.

In fact, there are indeed companies that have taken the lead in introducing price reduction measures. A few days ago, Chery New Energy issued a statement saying that thanks to the synchronous reduction of vehicle production costs caused by the global raw material price pullback and other factors, it is scheduled to officially adjust the official guidance price of its models from March 27, with a maximum reduction of 9,000 yuan, and the models involved in the adjustment include QQ ice cream, Little Ant and Unbounded Pro three micro electric vehicles, which have a power of 10kWh ~ 40kWh. It is estimated that the cost reduction of new energy vehicle batteries brought about by the reduction of lithium carbonate prices can reach 2000 yuan ~ 7000 yuan.

Geometry Automobile also announced that due to the reduction of the cost of new energy vehicles, the reward activity will be launched, with a maximum subsidy of 13,000 yuan, which will be from April 1 to April 30. The participating models include Geometry E, Geometry G6, and Geometry M6. Specifically, the maximum subsidy range of Geely Geometry E series is 10,000 yuan; The maximum subsidy range for the Geometry G6 series and M6 series is 13,000 yuan.


Vehicle prices may fall or become trending

"Smart electric vehicles also abide by 'Moore's Law', and after 10 years, 50,000 yuan can buy smart electric vehicles." Zhu Jiangming's judgment on the future development trend of new energy vehicle prices is not unreasonable. In his view, in the past, domestic automobile companies generally had 4 years of new-generation products, and foreign countries may take 6 years. And smart electric vehicles as electronic products two years more generation. In the current cost composition of intelligent electric vehicles, 60%~70% of the cost comes from electronic components, including batteries, electric drives, electronic controls and intelligent cockpits, and these main costs have a lot of room for price reduction in the future.

Zhu Jiangming judged that after 10 years, the cost of batteries can be reduced by half, and the cost per kWh may drop to 300 yuan; In 10 years, the cost of the 200kW electric drive system of electric vehicles is expected to be reduced to 4,000 yuan. Among them, the localization of electronic components will become an important way to reduce costs, Zhu Jiangming expects that after 10 years, the cost of core components such as IGBT, MCU, and isolation drive will be reduced by 60%; In terms of intelligent cockpit and intelligent driving, a chip total control only needs 6,000 yuan after 10 years, while the current cost of intelligent cockpit is about 8,000 yuan, and the cost of intelligent driving is 30,000 yuan. Overall, Zhu Jiangming believes that in 10 years, the battery cost of a smart electric vehicle will be 15,000 yuan, the cost of electric drive will be 4,000 yuan, the cost of the intelligent part will be 6,000 yuan, the cost of body interior and chassis will be 25,000 yuan, plus the total cost is just 50,000 yuan. "The battery, electric drive, intelligent cockpit and traditional components add up to almost 50,000 yuan, according to which it is estimated that the price of mid-to-high-end electric vehicles is expected to be achieved in 10 years." According to Zhu Jiangming's calculations, in the future, there is still a lot of room for new energy vehicles to reduce prices. Zhu Jiangming also said that from a longer-term time perspective, cost pricing will be the trend in the future. For the price war in the industry, Leapmotor has always insisted on cost pricing, and there is no brand premium. "In the future, the car will be just a consumer product, just like buying a TV, it is just a means of transportation, and it is completely possible to reduce it to 50,000 yuan." Zhu Jiangming said.


In fact, with the advancement of technology and the growth of scale, the cost of new energy vehicles and various core components has changed greatly in the past 10 years. Taking the lithium iron phosphate battery in the power battery as an example, the cost of 1kWh has dropped from 3.5 yuan 10 years ago to 0.6~0.7 yuan today. The price of new energy vehicles has also dropped significantly in the past 10 years. Deducting factors such as price fluctuations caused by short-term supply demand and other factors, with the continuous advancement of technology and the rapid growth of scale, there is still a lot of room for price reduction of various core components of new energy vehicles in the future, and in the long run, the cost of new energy vehicles is also likely to decline. It is an irreversible development trend of the industry to promote the decline in the price of new energy vehicles, but the price decline brought about by this cost reduction is not a blind price war, but requires car companies to reasonably regulate according to their own cost control, brand development and other factors.


Originally published on China Automotive News on April 11, 2023