Electric carmakers in China hike prices on rising material costs
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A Tesla store opened in Shanghai (China) on December 4, 2021. Customers can experience the new electric vehicle.
Future Publishing | Future Publishing | Getty Images
As raw material costs rise, a number of Chinese electric vehicle manufacturers have had to increase the price of their vehicles.
Some businesses like TeslaWarren Buffett-backed BYDAnalysts said that the companies, who have been working to establish more secure supply chains, would be able handle this challenge. They warned that some smaller and less-expensive players could struggle, and may even have to reduce their models.
Chinese company starts electric car startup XpengHas raised the prices of its vehiclesBetween 10,100 and 20,000 Yuan ($1,587) These prices have changed in the past two weeks Tesla has carried out several price hikesChina. BYD Motors has also seen an increase in prices.
SAIC-GM Wuling is a joint venture of GMand state-owned automaker SAICIt has also increased the cost of its products. Wuling produces lower-cost vehicles, but it is China’s second largest new vehicle manufacturer.
Due to the rising costs of raw materials for components like batteries as well as the ongoing shortage of semiconductors, companies are facing significant challenges.
Benchmark Mineral Intelligence says that lithium prices have risen by more than 400% over the past year. The price of nickel, another important material has increased sharply. been extremely volatile.
Mid-level and entry-level brands are probably going to have some challenges of passing along … the cost increases to the market.
Demand for electric cars has been strong so far. China Passenger Car Association reported that new vehicle sales increased by 153.2% in the first half of this year.
Analysts do not expect an immediate increase in demand.
The impact on the demand is limited. CNBC spoke with Jason Low, principal analyst of Canalys tech research firm. He said that most buyers who already have decided to buy EVs… will either swallow the price tag or opt for a model lower in cost.
‘Shake down’
Although consumer demand is expected to be high, businesses may worry about how they will pass on additional costs to customers, especially if the company has a weak brand or operates at the bottom end of the market.
“Mid-level and entry-level brands are probably going to have some challenges of passing along … the cost increases to the market. They’re either going to absorb a smaller margin, or have to reduce certain products,” Bill Russo (CEO at Shanghai-based Automobility Limited) told CNBC.
Ora is an electric car manufacturer under China. Great Wall MotorsTwo of the company’s models have been canceled by the firm. According to the company, Black Cat was experiencing a loss of 10,000 yuan (1,569) per unit due to increasing raw material costs.
Expect a shakedown of some type that will remove some lower-priced products at mid-to high entry. Russo stated that as long as the supply chain negatively impacts… the product’s material economics, you can expect some companies to exit the market.
As the industry consolidates around better EV companies, there should be fewer and stronger players.
Tesla, BYD in good position
Low and Russo say that Tesla and BYD remain the most well-positioned players in the market, despite rising car prices.
Their strong supply chain for batteries and other parts is a major reason. BYD produces its own batteries, as an example. Tesla built a Gigafactory Shanghai for the Chinese market. It also has strong relationships with CATL, its battery supplier.
Their vertical integration allows them to remain more protected, even with the higher prices. Russo also stated, “Similarly, Tesla has slightly more power to transfer prices into the market.”
Low agreed with the sentiment.
Tesla and other major car manufacturers have scaled up to become EV producers, including BYD and Tesla. VolkswagenHe said that EV buyers have quickly shifted to electric cars and established reliable supply chains to handle price hikes and bottlenecks.
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