How to resist the car prices and rising prices of raw materials, power battery response method

Recently, the China Automobile Industry Association released data on the production and sales of new energy vehicles in January 2017. From the data, the sales of new energy vehicles are showing a serious decline in year-on-year and monthly sales. Insiders point out that in addition to the new energy vehicle promotion catalogue needs to be re-approved, the subsidy slope factor is also a major factor affecting production and sales.

Under the double pressure of re-approval of the promotion catalogue and the retreat of subsidies, the decline in sales of new energy vehicles is expected. In the face of the grim situation, the new energy car companies can be described as "big." It is reported that at present, while anxiously waiting for the promotion of the catalogue, in order to make up for the gap in subsidies, major car companies are engaged in fierce price negotiations with battery suppliers to lower the price of power battery manufacturers.

Subsidies have dropped dramatically. Power battery companies are under pressure to cut prices.

Since 2017, the new energy car industry has ushered in New subsidies: subsidies will be reduced by 20 % from 2016, and local government subsidies will not exceed 50 % of the central bicycle subsidy. It is estimated that according to the new subsidy standards, the new energy vehicle bicycle has produced a price difference of up to 40,000 yuan.

Sales of new-energy vehicles have fallen a bit as subsidies have changed. According to data released on February 14 by the China Automobile Industry Association, in January, domestic production and sales of new energy vehicles were 6,889 and 5,682, respectively, down 69.1 % and 74.4 % from the same period last year. Of the 35 new energy models sold, 15 new energy vehicles sold at 0, of which 12 were pure electric models, accounting for 80 % of the total.

As power batteries account for about one-third to half of the cost of new energy vehicles, it is reported that major car companies are engaged in fierce price negotiations with battery suppliers in order to increase profit margins and fill the gap in subsidies.

Industry experts analysis, according to the current new energy vehicles are accepted by the market, it is difficult for the vehicle factory to pass on the rising costs to consumers. Only after the price of power batteries has dropped and the price of new energy vehicles has improved, new energy vehicles may survive the severe test period of subsidy retreat. The media forecast that the price of domestic power batteries will drop sharply in 2017, and the price reduction of power batteries will become the industry's "main theme" for the entire year.

Material prices soaring power battery enterprises by "CLIP hit"

Overall, in the new round of subsidies under the baton, compared to the vehicle companies, the new energy car industry upstream power battery companies will be under greater pressure.

On the other hand, since late October 2016, the prices of battery raw materials such as copper foil, aluminum foil, electrolytic nickel, electrolytic manganese, lithium cobalt acid and ternary materials have all increased significantly. As of Friday, the price of lithium cobalt acid had risen to between $29,000 and $295,000 per ton, according to the latest data from Battery China. The average price was 33,000 yuan per ton higher than two weeks ago, more than 30 % higher than before the Spring Festival. In the same period, the price of the dynamic ternary material 523 rose to 16.8-175 million yuan/ton, and the average price rose by 12,200 yuan/ton from two weeks ago, which exceeded 5 % from the end of 2016; The three-yuan precursor market is quoted at 9.6-99 thousand yuan per ton, and the average price is up 0.84 million yuan per ton from two weeks ago.

According to foreign media reports, commodities have generally gone up since Trump's victory in November 2016. Mr Trump's plans to expand infrastructure spending will trigger further increases in industrial commodities such as lead, Palladium, copper, nickel and cobalt in 2017.

The increase in raw material prices will certainly increase the cost of battery production. The profit space of power battery enterprises will be greatly reduced under the double "clamping" of increasing production cost and reducing price. Experts predict that profits will fall to around 10 per cent in 2017, a major test for power cell companies.

How should power battery enterprises cope with the current upstream and downstream double "clipping" situation? Experts stated that power battery companies need to invest more in product technologies such as cathode materials, diaphragm, battery management systems(BMS) and production processes to continuously increase the specific energy and cycle life of batteries(disguised reduction of battery prices); In addition, the power battery industry should break the monopoly of certain upstream industrial chain links such as battery raw materials, build an open and win-win industrial ecological chain, and promote the coordinated and stable development of the entire industry.

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