Recently, the most lively thing in the new energy industry has been the price increase of electric vehicles, from TSLA to BYD, from Xiaopeng to Ideal, and from scratch to Wuling Hongguang, which is quite spectacular.

After more than a year of continuous increase in material prices upstream of lithium batteries, the price of lithium carbonate has surged since the beginning of the year, finally becoming the last straw, pushing this round of price competition in the lithium battery industry chain to a climax.

From upstream materials to midstream lithium batteries, and then to downstream electric vehicles, a comprehensive price adjustment has begun. What is the current situation? Where will it go again?

01. Price increase of upstream materials

This round of upstream material price increase for lithium batteries began in the second half of 2020. However, due to the increase in utilization and yield rate of lithium battery companies in the past two years, in the early stage of upstream material price increase, lithium battery companies can appropriately digest the upstream material cost pressure by improving their own production efficiency and locking in long-term orders in the early stage.

However, there is ultimately a limit to this self digestion ability.

Starting from the middle of last year, this offsetting purpose began to decline, and the increase in upstream material costs began to bring real pressure to downstream lithium battery companies, manifested as some lithium battery companies starting to partially increase prices.

Of course, different lithium battery companies have different abilities to resist upstream material cost pressures. Leading companies like CATL have greater advantages in technology, customers, industry chain cooperation, supply chain management, etc. Therefore, their resistance to upstream material cost pressures will last longer, and the maintenance time for higher gross profit margins will also be longer. It was not until the beginning of this year that it was reflected as true pressure.

So, the upstream material price increase that began in the middle of last year is more meaningful. The material cost increase during this period directly translates into cost pressure for downstream lithium battery companies, and the interference of other factors has weakened. The industrial chain landscape we see is indeed the same.

Therefore, we will focus on analyzing the price changes that began in the middle of last year.

From early July last year to present, lithium carbonate has increased by about 500%, lithium hydroxide by about 400%, ternary materials by about 130%, lithium iron phosphate by about 220%, electrolyte by about 40%, and the prices of negative electrode materials and separators have also slightly increased.

Overall, from early July last year to present, the cost of the four major materials for lithium iron phosphate batteries (excluding taxes, the same below) has increased from about 0.32 yuan/Wh to about 0.64 yuan/Wh, and the cost of the four major materials for ternary batteries has increased from about 0.40 yuan/Wh to about 0.76 yuan/Wh, with an average increase of 90% -100%.

Due to the significant increase in material costs, there may be some differences in the overall cost increase of battery cells from different companies and specifications, but the increase is basically over 65%. Currently, the comprehensive cost of lithium iron phosphate square cells exceeds 0.78 yuan/Wh, and the comprehensive cost of ternary square cells (523) exceeds 0.94 yuan/Wh.

02. Price increase of midstream lithium batteries

Due to the continuous impact of upstream material costs, the price increase of lithium batteries varies among different lithium battery companies, types, models, cooperation depths, and commercial terms, and the timing is also different.

Overall, from mid year last year to present, the price of lithium iron phosphate battery cells has increased from about 0.60 yuan/Wh (excluding tax, the same below) to about 0.90 yuan/Wh, an increase of about 0.3 yuan/Wh, or about 50%; The price of ternary battery cells has increased from about 0.70 yuan/Wh to about 1.10 yuan/Wh, an increase of about 0.4 yuan/Wh, or about 57%.

Overall, from mid year last year to present, the sales price of battery cells has increased by 50% -60%, while the cost of the four major materials has increased by 90% -100%, and the overall cost of battery cells has increased by over 65%.

The increase in battery costs is still greater than the increase in battery sales prices, and lithium battery companies still face certain cost pressures, with the possibility of further price increases in the future.

Of course, different lithium battery companies face different cost pressures, and the driving force for price increases also varies.

03. Price increase of downstream electric vehicles

Against the backdrop of significant price increases for lithium batteries, the electric vehicle industry, which generally has low gross profit margins, is also facing significant cost pressures, and the result is inevitably to follow the price increase.

Based on the price increase of lithium batteries mentioned above (an increase of about 0.3 yuan/Wh for lithium iron phosphate batteries and about 0.4 yuan/Wh for ternary batteries), we have selected several representative car models for price increases and evaluated their magnitude based on their charged capacity.

For greater comparability, we do not consider the expected subsidy rebate factors (as electric vehicle sales have rapidly increased in recent years, electric vehicle companies can normally absorb subsidy rebate factors through scaling up, rather than relying solely on material cost reductions) and other non lithium battery cost price increases.

TSLAModel3 (rear drive): The price has increased from 256000 yuan last year to 280000 yuan currently, an increase of 24000 yuan; Supporting a 60KWh lithium iron phosphate battery, the corresponding digestion battery cost is 0.40 yuan/Wh, which is higher than the price increase of lithium iron phosphate batteries.

TSLAModely (Long Range): The price has increased from 348000 yuan last year to 376000 yuan currently, an increase of 28000 yuan; Supporting 78.4KWh ternary batteries, the corresponding cost of digesting batteries is 0.36/Wh, which is basically the same as the price increase of ternary batteries.

Xiaopeng P7 (480G): The price has increased from 220000 yuan last year to 240000 yuan, an increase of 20000 yuan; Supporting a 60.2KWh lithium iron phosphate battery, the corresponding digestion battery cost is 0.33 yuan/Wh, which is basically the same as the price increase of lithium iron phosphate batteries.

Xiaopeng P7 (670G): The price has increased from 257000 yuan last year to 273000 yuan, an increase of 16000 yuan; Equipped with 80.9KWh ternary batteries, the corresponding digestion battery cost is 0.20/Wh, which is lower than the price increase of ternary batteries.

Ideal ONE: The price has increased from 338000 yuan last year to 349800 yuan, an increase of 11800 yuan; Supporting a 40.5KWh ternary battery, the corresponding digestion battery cost is 0.29/Wh, which is lower than the price increase of ternary batteries.

It can be seen that the price increase of batteries varies depending on the price increase of different car companies. However, in most cases, the price increase of electric vehicles has not compensated for the upstream battery price increase, and some electric vehicles have not yet raised their prices. Electric vehicles still face significant pressure from material costs.

In addition, if we further consider the factors of subsidy reduction and non battery cost increase, the cost pressure on electric vehicle companies will be greater.

In other words, there is still room for further price increases for electric vehicles overall.

A few days ago, Li Xiang, an ideal car, complained on his microblog that he had contracted with the battery manufacturer to determine the range of battery price increase in the second quarter, and almost immediately announced the price increase. Brands that have not yet raised their prices are mostly those whose price increases have not yet been agreed upon, and once they are agreed upon, they will generally immediately raise their prices. The intensity of the increase in battery costs in the second quarter is very outrageous.

This may be a true reflection of the current price game situation in the lithium battery industry chain.

Overall, the current upstream material cost increase is greater than the midstream lithium battery price increase, and the midstream lithium battery price increase is also greater than the downstream electric vehicle price increase. The price increase is continuously weakened in the downstream transmission process.

The reasons for this are as follows: firstly, downstream bargaining power is weaker; secondly, downstream is actively offsetting upstream cost pressures by increasing production utilization, yield rate, scale, and supply chain management; thirdly, downstream is also passively sacrificing gross profit margin; fourthly, terminal electric vehicles have just begun to explore price increases in recent years against the backdrop of good sales growth, which still needs to be verified by consumers.

At present, in the process of upstream downstream transmission, the downstream increase is still lower than the upstream increase, and the cost pressure on the industrial chain is still significant. Therefore, in the context of high upstream material costs, it is not ruled out that the prices of midstream lithium batteries and downstream electric vehicles will further increase to offset the cost pressure they face from upstream.