Electric car manufacturers in China raise prices due to rising raw material costs

Customers experience a new energy electric vehicle at a Tesla store in Shanghai, China, December 4, 2021.

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A series of electric vehicle manufacturers operating in China have been forced to increase vehicle prices as input material costs soar.

Some companies like Tesla and Warren Buffett is backed BYDAlready working to establish a more secure supply chain, analysts say, will be able to cope. However, some low-cost and smaller players may find it difficult and even forced to cut models from their roster, they said.

China’s electric car start-up Xpeng Yes increase the price of its car between 10,100 Chinese yuan ($1,587) to 20,000 yuan. In the past two weeks, Tesla made some price hikes for its vehicles in China. BYD and WM Motors have also raised prices.

Even SAIC-GM Wuling, a joint venture between GM and state-owned car manufacturers SAIC, has increased the price of its models. Wuling makes cheaper vehicles but is the second largest new energy vehicle company in China.

Companies are grappling with the rising cost of raw materials that go into components such as batteries, as well as a continued shortage of semiconductors that have affected the automotive market globally.

For example, the price of lithium is up more than 400 percent year-on-year, according to Benchmark Mineral Intelligence. Nickel, another important material, has risen sharply and its price has increased very volatile.

Mid-range and low-end brands will likely have some challenges overcoming… the rising costs to the market.

So far, demand for electric vehicles has remained strong. In the first two months of the year, sales of new energy vehicles in China grew 153.2 percent year-on-year, according to the China Tourist Vehicle Association.

Analysts do not expect a short-term hit to demand.

Jason Low, principal analyst at technology research firm Canalys told CNBC.

‘Shake down’

While consumer demand will be strong, companies may worry about the ability to pass on extra costs to consumers, especially those without a strong brand or those operating in the lower segment of the market.

“Mid- and low-end brands are likely to have some challenges getting through … increased costs to the market. So they’ll either get lower margins or they’ll have to lower their prices a bit. certain products,” Bill Russo, CEO at Shanghai-based Automobility Limited, told CNBC.

Ora, an electric vehicle brand under China Great Wall Motors, has suspended orders for two of its models. The company says its Black Cat car is losing 10,000 yuan ($1,569) each due to rising raw material costs.

“Expect a change of form that will eliminate some mid-to-lower priced products. As long as the raw material supply chain has a negative impact on … physical economics. of the product, then you can expect some companies to exit the market,” Russo said.

“Less, stronger players will be game over here as the industry consolidates around better electric vehicle companies.”

Tesla, BYD in good location

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