Prices of EVs raised due to price increases of battery materials

Several Chinese manufacturers of electric vehicles (EVs) raised prices recently, which is expected to affect sales. The sky-high prices of nickel and lithium, key materials used to make EV batteries, have forced carmakers ranging from global leader Tesla to Anhui province-based Chery Automobile to raise prices and pass on the higher costs to buyers. “They need to raise prices to maintain their profit margins,” said David Zhang, a car industry researcher at the North China University of Technology. “But higher vehicle prices could hurt sales growth, with budget-conscious consumers shying away from expensive cars.”

Last month, Cui Dongshu, General Secretary of the China Passenger Car Association (CPCA), said the sales of new-energy vehicles – pure electric, plug-in hybrid and fuel-cell cars – in China would jump 84% to 5.5 million units this year. Zhang forecasts a more moderate 47% gain. Tesla said the price of the Model Y’s basic edition would rise by CNY15,060 to CNY316,900, effective immediately. The U.S. carmaker raised the prices of two versions of the Model 3 and the long-range Model Y by at least CNY14,248. Mainland Chinese brokerage TF Securities said in a research note on March 9 that a Model 3 fitted with a 76.8 kilowatt-hour (kWh) battery would face an additional cost of CNY10,500 if nickel prices rose from USD20,000 to USD50,000 a ton.

Prices of cars made by NIO and Xpeng Motors, Tesla’s Chinese competitors, would also increase by about CNY10,000. Guangzhou-based Xpeng plans to raise prices of its vehicles from this week to offset the rising costs. The price of Xpeng’s flagship P7 sedan would rise by CNY20,000, while the P5 family car would see its price go up by CNY10,000. BYD, China’s largest home-grown EV company, raised the prices of its Dynasty and Ocean branded vehicles by CNY3,000 and CNY6,000, respectively. This is the second time that it has raised prices in just two months.

“A reduction in cash subsidies has already dented buying interest in EVs,” said Tian Maowei, Sales Manager with Yiyou Auto Service in Shanghai. “Higher prices could further deter some from buying these cars.” China’s Ministry of Finance slashed the cash subsidies granted to EV buyers by 30% effective from January 1 this year. Pure electric cars with a driving range of more than 400 kilometers are currently eligible for a CNY12,600 subsidy, compared with CNY18,000 previously, the South China Morning Post reports.