In Y2021, raw materials price increases crazily , the electric car manufacturing industry bears the brunt of becoming a "victim". What's the influence to electric car manufacturing on electronics components price increase 2021?

As China domestic and foreign commodity prices are constantly refreshing market perceptions, as an important representative of the middle and lower reaches of the industry chain, electric car manufacturing companies bear the brunt of this round of cost increases, and can most directly feel the impact of upstream price increases.

The reporter recently interviewed the elecctric car manufacturing companies learned that most companies will be significantly affected by rapid cost increases in the short term.

Passive price increasing in electric car manufacturing

Tesla, an electric car manufacturing company, received market attention due to successive price cuts, turned around and raised prices.

Tesla China officially announced on May 8 that the upgraded version of Tesla Model 3 standard battery life increased by 160 USD, and the price became 40,000 USD. This is the 2nd time price increase for Tesla this year.  

Unusually, Tesla has increased the prices of Model Y and Model 3 models many times this year. In March, Model Y increased by 1300 USD, and the price of Model 3 in the US market in April has also been successively increased. It has been raised three times, with an increase of $2,000.

Regarding the price adjustment, Tesla said that it "reflects the actual situation of cost fluctuations";  At the end of 2020, Tao Lin, Tesla's global vice president, publicly stated that the price of electric vehicles is related to cost and is affected by the cost of electric vehicle components.

Some Chinese electric car manufacturing enterprises are also being affected. Taking Great Wall Motor as an example, GWM's comprehensive gross profit margin was 15.13% in the first quarter of this year, an increase of 5.8% year-on-year, but a decrease of 3.13% month-on-month; Electric vehicle profit also fell by about 25% month-on-month to 770 USD. In this regard, the analysis pointed out that the main reasons include the increase in the price of raw materials that caused electric vehicle components cost to rise by 158 -317 USD, and the shortage of chips caused the wholesale decline in 2021 first quarter, which led to the increase in the fixed cost of electric vehicles manufacturing.

Electric car manufacturing, Surging costs beyond imagination

In the past 6 months , under the continued global monetary easing, the prices of many commodities, including black, non-ferrous metals, chemicals, and agricultural products, have continued to rise, and most of them have reached historical and staged highs.

On May 12, in the domestic futures market, the main iron ore contract 2109 went up again, reaching a maximum of 215.5 USD/ton, a record high again. The main coking coal contract 2109 also refreshed its historical extreme value on the same day, reaching 339.4 USD/ton. As the downstream products of the two, the prices of steel-based commodities also rose rapidly from January to April 2021. The main futures contracts of rebar, hot rolled coils, and wire rod have all set new historical highs in recent days.

In addition to the black series, aluminum prices exceeding 3174.6 USD/ton, nearly 476.2 USD/ton glass, and Shanghai copper, which went straight to 12,698.4 USD/ton, are constantly refreshing market awareness and impacting the cost pressure defense line of downstream manufacturing. .

"The price of (copper) has risen by nearly 1,583.7 USD/ton in one month. This increase is too fast and far exceeds expectations. It is still unclear how much it will rise, but the current cost is already too high." said a procurement person for a enterprise in Guangdong.

The lithium battery industry upstream of electric cars is also a typical representative of the impact of this round of costs.

Lithium battery raw materials have experienced a fierce price increase since 2020. The four main materials of cathode material, anode material, electrolyte and diaphragm have all been greatly affected.

Taking cathode materials as an example, the low price of lithium phosphate, the raw material for lithium iron phosphate batteries, was less than 6,349.2 USD/ton last year, and the market price on May 12 exceeded 12,698.41 USD/ton, pushing the price of Ternary lithium iron phosphate battery materials from 1,587 USD  rose to over 7,936.5 USD; with the soaring prices of nickel, cobalt, and manganese, the price of ternary battery materials also rose from 17,460-19,047 USD/ton to 23,809.5-25,396.8 USD/ton. The growth of graphite in the negative electrode of the battery is not obvious, but the required raw materials also include copper, which is rising rapidly.

"If we can predict the future demand earlier and lock in raw materials a year in advance, we will have a stronger ability to digest prices." ABPower chariman said.

Despite the sudden increase in cost pressures, market demand in the new energy market is also rapidly increasing. Only 2020's scale has doubled. The scale effect can also help companies reduce costs, and prices can be digested by volume. There are more and more green-plate cars on the road. The reason why everyone can bear the pressure is that the future can be expected.

Different downstream response methods on electric car manufacturing channels

In the face of crazy upstream price increases, mid and downstream electric vehicle part companies can only respond by launching a price transmission mechanism. 

In the electric car manufacturing industry chain, some electric car components manufacturers can transmit prices downstream. The reporter learned from an automotive wheel manufacturer in South China that its main raw material is aluminum ingots, and the price has risen from about 2,222 USD/ton in 2020 to nearly 3,174.6 USD/ton recently, an increase of nearly 50%.

The relevant person in charge of the manufacturer told reporters that the price increase of aluminum ingots directly increases the company's production costs,they transfer costs through price increases.

Will the impact of the massive skyrocket continue?

The impact of this global commodity super bull market is undoubtedly far-reaching, but downstream companies are not as severe as the market expected.

"The logic that the price increase of raw materials directly leads to the price increase of the whole electric vehicle does not necessarily hold. Electric car companies still have a certain margin for gross profit, and the price is not entirely determined by raw materials. It also includes factors such as brand, pricing system, sales channels, and the domestic automobile market. The competition is fierce, and car companies will be very cautious about raising prices." A researcher from a private equity agency told reporters.

On the electric vehicle side, the impact of rising raw material prices may be limited. According to the electric car market researcher's analysis, in the field of new energy vehicles, the amount of metal used in electric vehicle is not much. Take a hot-selling American brand electric vehicle as an example. It uses an 811 battery with a battery charge of about 75 degrees. It requires a total of about 7kg of cobalt, 56kg of nickel, and 50kg of lithium salt. The total corresponding cost is about 2222 USD at the current price level. Which accounts for about 5% of the electric car’s price, and the impact of metal price increases is relatively limited; if it is replaced by a domestically made explosive small electric car, the lithium iron phosphate solution is only 10 degrees, and the battery only needs about 5.2kg of carbonic acid. Lithium, the corresponding cost is less than 80 USD, only accounts for about 2% of the electrica car price. At present, high-end new energy vehicles are turning to the 811 route. The consumption of more expensive cobalt is reduced and the consumption of nickel is increasing, and the overall cost continues to decrease; while the low-end electric vehicles mostly use lithium iron phosphate batteries, and the overall cost is lower than that of the ternary system.

At present, most of the impact of upstream price increases can be digested by car companies. In the first quarter of this year, the gross profit margins of many electric car companies were affected by the new accounting standards, and the increase in the price of bulk raw materials led to increased costs. Under the influence of such unfavorable factors, 8 of the 14 electric car companies still achieved gross profit margins. Year-on-year growth, such as King Long Automobile, Great Wall Motor, Changan Automobile, SAIC Motor, etc.

"Power batteries are a relatively special phenomenon. In order to promote the popularization of new energy cars, their prices must continue to fall. For most other industries, price pressure must be viewed dialectically. Price increases are currently detrimental. However, if the company signs new orders at a high price point, then the upstream price will drop and the company will benefit.” Short-term profit margin changes will not have much impact, and more attention will be paid to the stability of long-term prospects. 

It is worth noting that the main reason why iron ore prices remain high is that the supply side is highly concentrated, and the dominant power is in the hands of the seller. From the demand side, due to the rapid and large increase in steel prices in the early stage, downstream steel industries such as shipbuilding and home appliances cannot withstand the continued high steel prices, and it is difficult for the steel prices to continue to rise sharply in the later stage.