Zeng Yuqun bet on the price of lithium at 200,000 yuan/ton, and offered to propose a new price agreement, so as to benefit from key customer OEMs such as Ideal, Weilai, and Jikrypton, and lock in long-term orders.
cut prices.
The battery “first brother” CATL made a bet on this decision in the spring of 2023.
Zeng Yuqun, chairman of Ningde era who likes to play chess, made a trick of iron door bolt. This is one of the most basic killing games in chess. Under the restraint of the middle cannon, the attacker uses rooks or pawns to attack the bottom line, and sometimes needs Lu Shuai’s assistance.
Automobile Business Review learned from a certain car company that recently, the Ningde era, which is “gambling and strong”, started this year with a strong start: to suppress lithium prices and tie up car companies-propose a new price agreement, and let ideal, Weilai, and extremely Krypton and other key customer OEMs have locked in long-term orders.
The Ningde era’s way of making profits to car companies is to “save money” from upstream lithium mines—50% (this ratio will be dynamically adjusted) of batteries are calculated at the raw material price of lithium carbonate of 200,000 yuan/ton, and the rest are calculated at the market price, and the price difference is refunded OEM. For the OEMs that have accepted the profit sharing, the proportion of batteries purchased within three years shall not be less than 80%, and the supply volume in the 4th to 5th year shall not be lower than that of the previous year.
The core point of the battery leader’s price reduction is: take the price of 200,000 yuan/ton of lithium carbonate as an important calculation index, and the part higher than 200,000 yuan/ton, Ningde Times and the main engine factory will each bear half of it, and together they will lower the price of lithium. down.
At present, the price of battery-grade lithium carbonate is about 442,000 yuan/ton.
Ningde era’s confidence in lowering lithium prices is, on the one hand, as a major customer with a large enough procurement volume to simultaneously negotiate with lithium salt factories, and reduce the purchase price within the year to less than 300,000 yuan/ton; on the other hand, it is Ningde era’s own Lithium mines have begun to increase in volume, which can ease the tight supply.
A person familiar with the matter told the reporter of Automobile Business Review that in the case of a large surplus of power battery production and production capacity, competition will become more intense this year, and the possibility of a price war cannot be ruled out.
Even if there is a price war, it will be good for leading manufacturers.
Lithium price rebate
As the core component of new energy vehicles, it is also the most expensive component. This round of price cuts planned by battery manufacturers is related to the recent wave of price cuts by car companies.
As Tesla took the lead in cutting prices, domestic new energy car companies started a price war.
At present, car companies such as Xiaopeng, AITO Wenjie, and Aian have followed up one after another, and Feifan has cut prices in disguise. Even the Japanese car Toyota, which has always had a strong price, and the pure electric SUV bZ4X have also cut prices by 60,000 yuan.
This year, the “state subsidy” for new energy vehicles, which has been implemented for 14 years, has withdrawn from the stage of history. Under the premise of subsidy decline, car manufacturers have raised prices one after another, with the increase range ranging from 20,000 to 10,000 yuan.
But Tesla, the catfish, has changed the wind.
Starting from October 24, 2022, the prices of Tesla Model 3 and Model Y have been reduced three times in a row. The current starting prices are 229,900 yuan and 261,900 yuan, respectively, a drop of 36,000 yuan and 27,000 yuan.
Despite this, Tesla’s devilish cost control ability will still maintain a gross profit margin of 25.6% in 2022.
An industry insider once told the Auto Business Review reporter that Tesla’s domestic price cuts this round are to rebalance supply and demand. The epidemic risk control in November and December 2022 and the short-term chaos after the liberalization caused the release of new production capacity, the production of cars could not be sold, the waiting period was shortened, and the inventory was increased.
The person said that for Tesla, the profit margin is relatively fat. Even after the price cut, there is still about 20% gross profit margin in China, and there is enough room to support the price cut.
However, whether independent brands or Chinese car companies can follow up depends on each company’s cost control capabilities. “There are still many companies that are in a state of loss. From the perspective of the contribution of the border, they may not be able to withstand such a large (substantial) price cut.” The person said.
Under such circumstances, the above-mentioned people familiar with the matter revealed that car companies need to reduce costs, starting with batteries, which account for 40%-60% of the cost, and buyers and suppliers in the industry chain are renegotiating the agreement signed last year. Either downsize or cut prices, or both.
In 2022, lithium carbonate, the raw material for making batteries, has soared, rising from 280,000 yuan/ton in January to a maximum of nearly 590,000 yuan/ton at the end of the year, an increase of more than 110.7%.
According to industry insiders, the surge in lithium carbonate has cost each electric vehicle an average of 15,000 yuan in 2022.
If batteries are produced at a lithium carbonate price of 200,000 yuan/ton, car companies can save about 30,000 yuan in cost for each electric vehicle.
This can somewhat offset the losses caused by the reduction of state subsidies and passive price cuts.
Judging from the announcements of listed companies in the automotive industry chain that have released performance forecasts, auto companies and parts suppliers are both prosperous and hurt: raw materials with soaring prices make the reports of upstream lithium mining companies the best, swallowing Ningde Times and other batteries Profit of manufacturers and car companies.
The upstream lithium mines, represented by Tianqi Lithium, are making a lot of money, and the profit growth rate is 3 times. The Ningde era is considered the best among battery companies. It is estimated that the net profit in 2022 will be 29.1 billion to 31.5 billion yuan, a year-on-year increase 82.66%-97.72%, Yiwei Lithium Energy and Guoxuan Hi-Tech have achieved positive growth in profits, which is not as good as that of upstream mining companies, while Funeng Technology is expected to lose 790 million to 920 million yuan, and the loss has narrowed by 3.34% year-on-year. 17.08%; car companies have profit and loss. BYD expects net profit to reach 16 billion to 17 billion yuan, achieving a year-on-year increase of 425.4% to 458.3%. Losses increased.
From the perspective of gross profit margin, according to the financial report for the third quarter of 2022, lithium mining companies accounted for more than 55%, battery companies accounted for about 10%, CATL was the highest at 18.95%, and the situation of OEMs varies. burden.
As the leading brother, Ningde era’s price cut at this time is undoubtedly taking advantage of the trend and taking the lead: it started with lithium mines, which have eaten up the profits of batteries and car companies, and suppressed the price of lithium mines, so as to transfer profits to car companies. While distributing profits to car companies, it locked long-term orders with car companies, and effectively countered the second- and third-tier brothers who have been frantically competing for customers in the past two years.
This kills two birds with one stone.
Active adjustment
Ningde era took the initiative to adjust, to some extent it had to be done.
In January this year, both the output and installed capacity of battery manufacturers declined.
According to data from the China Automotive Power Battery Industry Innovation Alliance, domestic power battery production in January was 28.2GWh, a year-on-year decrease of 5%, and a month-on-month decrease of 46.3%. The installed capacity in January was 16.1GWh, down 0.3% year-on-year and 55.4% month-on-month.
CATL ranks first in China with an installed capacity of 7.17GWh. Although it is still firmly in the leading position, the expansion of battery manufacturers such as BYD has squeezed its market share.
In January, CATL had a domestic market share of 44.41%, followed by BYD with an installed capacity of 5.51GWh, with a market share of 34.12%. The gap between the two is only 10 percentage points.
In December last year, CATL accounted for 49.49% of the market with an installed capacity of 17.89GWh. BYD’s performance is 9.36GWh, with a market share of 25.9%. In one month, BYD narrowed the gap from 8.53GWh to 1.66GWh.
As the number one leader in the dual-technology route of ternary lithium and lithium iron phosphate, in January, the installed capacity of lithium iron phosphate in the Ningde era was overtaken by BYD.
According to the survey of the above-mentioned people familiar with the matter, in the first week of February (2.1-2.7), 9 car companies delivered a total of 40,000-50,000 vehicles, with new orders of 50,000-60,000 vehicles, and the weekly delivery volume was lower than the new orders. The quantity is due to the need to destock.
The person estimated that the inventory of electric vehicles exceeds 1.3 million, of which less than 200,000 are stored in the warehouses of OEMs, and more than 1.1 million are in circulation including 4S stores.
According to his research on the production of electrolytes in the battery industry chain, he believes that the Chinese market may have produced 200GWh more power batteries last year, and 60-65GWh has been installed, corresponding to more than 1.3 million electric vehicles; as batteries The factory has 60-70GWh in stock, and the remaining more than 70 GWh is likely to be in the warehouse of the OEM.
The destocking of car companies will reduce battery orders, and the current declining price of lithium carbonate also confirms this judgment from the side.
Car companies are reducing orders, and competitors are racing wildly again. CATL only cut prices.
A netizen commented: “If Company C (referring to the Ningde era) does not cut prices and helps car companies that are deeply bound to itself carry over, then a large share of power batteries will be eaten by BYD. The total market share is so large, If you have more, he will have less, what will you do in the future, so you must lower the price and stand with your teammates.”
The cutting edge of price can only be cut upstream.
The price of lithium carbonate will soar in 2022, allowing Ningde Times to increase the price of major customers by 20%-40% in the first half of the year, and establish a price linkage mechanism.
However, some well-known brokerages also believe that the “lithium price rebate” of the Ningde era is only aimed at four major customers, including two new forces and two car companies with joint venture battery factories. The purchase volume of these four companies from Ningde Times is expected to be 60-70GWh this year, and the corresponding demand for lithium carbonate is about 40,000 tons.
As Ningde Times’ own Jiangxi lithium mine began to increase production and resource recovery, the increase in lithium carbonate was about 30,000 tons or more, which was just used for rebates, and the cost and selling price were evened out without compromising profits.
Why is it 200,000 yuan/ton
Why did Ningde era limit the price of lithium carbonate at 200,000 yuan/ton?
Ouyang Minggao, academician of the Chinese Academy of Sciences, professor of Tsinghua University, and vice chairman of the Committee of 100, also said at the expert media exchange meeting of the China Electric Vehicle 100 Forum (2023) on February 17 that a more reasonable price balance point in the future may be 200,000 Yuan/ton or so.
Ouyang Minggao said: “If the price of lithium is too low, battery recycling will not be profitable. Therefore, if you want to develop battery recycling, the price of lithium cannot be too low.”
Ningde era has its own lithium mines, and has also deployed battery recycling.
In order to solve the constraints of upstream raw materials, on the one hand, the battery “one brother” has deployed upstream mines at home and abroad, such as participating in lithium and nickel mines in Argentina, Congo (Kinshasa), Australia, North America, and Indonesia, and investing in lepidolite in Jiangxi, Sichuan and other places Mine and spodumene mine, on the one hand, lay out resource recovery. In addition to the holding subsidiary Guangdong Bangpu, it also bought out Jiangxi 414 tailings. CITIC Construction Investment predicts that its lithium carbonate self-supply rate will reach 9.4% in 2022-2024. 19.9% and 26%.
Ouyang Minggao believes that the main reason for the rise in lithium prices in 2022 is strong demand and short supply, and factors such as supply delays and the impact of the epidemic have led to sharp price increases.
He judged that the total amount of electric vehicles and power batteries is already quite large, so the growth rate will decline this year. “For example, the growth rate of electric vehicles will drop from nearly 100% to 30%-40%, and the total production and sales will be close to 10 million. (vehicles). The growth rate of power batteries will probably drop by about half from 150%. The growth rate of China’s total lithium-ion battery shipments will also decrease from nearly 100% in 2022 to about 50%, and the total shipments will be close to 1 billion kWh.”
At the same time, the proportion of plug-in hybrid and extended-range electric vehicles will increase, and the average battery load and total demand growth rate of new energy vehicles will decrease accordingly, and the tense demand situation will be greatly eased.
Ouyang Minggao predicts that lithium prices will further return to a rational level of 350,000-400,000 yuan/ton in the second half of this year. In the long run, the global lithium resource reserves are sufficient and the recoverable amount continues to increase. The battery material recycling industry will also welcome to develop opportunities.
Author of this article: Zhou Zhou, source: Automobile Business Review, original title: “Ningde era kills two birds with one stone: suppressing lithium prices and binding long-term orders”
Risk Warning and Disclaimer
Market risk, the investment need to be cautious. This article does not constitute personal investment advice, nor does it take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions or conclusions expressed herein are applicable to their particular situation. Invest accordingly at your own risk.