Battery Giant CATL Cuts Prices in China
The battery industry in China is about to undergo a price war. Media outlet 36Kr reported that CATL is taking the initiative to implement a battery price reduction plan for key car companies, and put forward a price reduction requirement of about 10% to its raw material suppliers.
The plan in CATL is not aimed at all of its customers, but only at key customers such as Li Auto, NIO, Huawei and Zeekr. The core clause is that, within the next three years, the price of lithium carbonate for some batteries will be settled at 200,000 yuan ($29,053)/ton, and the car companies that signed the agreement need to promise about 80% of their battery purchase volume is from CATL.
At present, the price per ton of battery-grade lithium carbonate is still around 470,000 yuan. If batteries can be purchased at a cost of 200,000 yuan per ton, it will undoubtedly greatly reduce the cost pressure on car companies. “Tesla is not one of them,” a source of 36Kr said. “The agreement will be implemented in the third quarter of this year, and some car companies have already agreed to CATL’s conditions.”
In view of CATL’s 10% price reduction requirement, some raw material suppliers said that, in the past, the company has had a high gross margin, and that it was rare to put forward such a demand. Some people in the battery industry have said, “This will make other battery makers very uncomfortable.” SVOLT, backed by Great Wall Motor, has already followed CATL’s move.
As a leading enterprise in the battery industry, CATL has always had a strong voice at the table, and it is rare for the company to take such a huge first step in reducing prices.
Last year, the prices of lithium carbonate and other battery materials soared, and CATL decided to increase the price of batteries accordingly. “At that time, the raw materials rose by 40%, and CATL’s products increased by about 40% too.” Some people familiar with the matter said, “This is actually quite rare. CATL’s rivals’ price increase ranges are much smaller.”
Therefore, EV companies such as NIO and Li Auto either make their own batteries or seek out other battery suppliers. CATL felt the pressure, especially in the second half of last year, and began to reflect on its business strategies.
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Recently, CATL and Ford announced that they will build a new battery factory in Michigan, US, to jointly produce lithium iron phosphate batteries, with an investment of $3.5 billion. In this project, CATL’s role is to provide technical and service support, while Ford engineers will be responsible for batteries and vehicle assembly. However, China will scrutinize the agreement to ensure the Chinese battery giant’s core technology isn’t handed over to the US carmaker, another sign of geopolitical tensions between the two powers complicating business deals, Bloomberg reported.