CATL flexes scale, power with ‘price war’

Battery prices had been falling for more than a decade before turning higher in 2022. That began to reverse late last year in China.

“There’s a price war going on. We’ve seen it some weeks ago at the vehicle level. We’re now seeing it at the battery level,” Eric Norris, president of Energy Storage at Albemarle Corp., the world’s largest producer of lithium for EVs, told Reuters.

CATL, he said, was looking to try to take advantage of its integration “to cut prices to gain share”.

Spot prices for lithium carbonate in China have dropped by about 30 percent since their peak last year, as inventories were sold down on concern the end of national EV subsidies in China would slow growth. That happened, as predicted, in January.

For CATL, the discount is a way to head off a bid by Chinese EV makers to seek alternatives.

Li Auto has said it will use SVOLT batteries in its new L7 crossover. Xpeng has developed a fast-charging battery with Sunwoda. The company said last year that CATL was no longer its largest battery supplier.

In a move that would lessen its reliance on CATL, Nio is planning to build a new battery plant with annual capacity to produce enough to power about 400,000 long-range EVs, Reuters reported on Friday.

SVOLT, among CATL’s smaller rivals, has also offered discounts on battery supplies, Chinese media have reported. SVOLT declined to comment and Reuters could not confirm those reports.

Electric vehicle demand in China has slowed, with the leading industry association predicting 35 percent growth in 2023, compared to 90 percent in 2022.

Outside China, CATL, which is building new battery plants in Germany and Hungary, is expanding rapidly and has deals to supply Ford Motor Co. and BMW Group. CATL batteries power Volkswagen’s ID series and Tesla’s Model 3 and Model Y built in China. Nearly 40 percent of those Teslas were shipped to overseas markets in 2022.

Battery cell prices for EV makers rose about 24 percent last year, said Prabhakar Patil, a battery industry consultant based in Detroit. The CATL offer would represent a total discount of about 6 percent from prevailing prices in China, if an automaker used it to lock in half of planned purchases, according to an estimate by Changjiang Securities.

“The reductions that CATL is offering would help the Chinese EV industry,” said James Frith, a principal at battery-tech focused venture capital group Volta Energy Technologies. “From the Chinese viewpoint, with China having the dominant electric vehicle market, they don’t want to lose that momentum.”

“If some of those EVs with discounted batteries end up in Europe,” Frith added. “it could cause trade tensions.”