Why the price of some electric cars should soon drop significantly

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The Chinese giant CATL, which supplies most electric cars with its batteries, will participate in the price war launched by Tesla. As ? Simply thanks to a huge discount on the price of batteries, but only for a handful of Chinese manufacturers. An anti-competitive practice aimed at driving Tesla out?

Zeekr X (003)
Zeekr X (003)

In 2022, CATL equipped 37% of the electric cars produced worldwide. This makes the Chinese company the industry leader, well ahead of Korean LG and Chinese rival BYD, both tied for a 13.6% market share. The Chinese giant intends to take advantage of its situation, envied by its competitors, to cut its margins a bit, while increasing its market share. As ? Massively reducing their prices, to follow the trend started by Tesla at the beginning of the year.

An XXL discount on the price of batteries

The information is broadcast by the Asian media. 36 crowns This tells us that CATL is preparing a special program to greatly reduce the cost of producing electric cars for its partners. In detail, it would be a discount on the price of batteries produced by CATL and sold to certain local manufacturers.

Currently, the ton of lithium it is listed for around 470,000 yuan, or the equivalent of 64,000 euros. The program devised by CATL would allow granting special members a purchase price of 200,000 yuan per ton, or about 27,000 euros. For this, the manufacturers would have to sign a 3-year contract with CATL and commit to source 80% of their batteries from the Chinese giant.

The CATL plant in Germany
The CATL plant in Germany

According to Chinese media, CATL’s suppliers have received requests from the latter to lower the selling prices of raw materials. To help battery manufacturer reduce production cost. Last year, CATL implemented a mechanism to automatically vary battery prices, linked to raw material costs. The sale price of the batteries had then increased by 40%. But against all expectations, the increase in the cost of production was much lower, allowing CATL to comfortably increase its margins.

Chinese manufacturers will have a field day

Enough to allow the Chinese giant to carry out targeted price reductions for its favorite partners. Then, the Asian media quote the car manufacturers Li Auto, Nio, Huawei and Zeekr. Their point in common: offering ultra-innovative electric cars, such as the Zeekr 001, for example, with its range of 1,000 km. We can also mention Huawei’s Avatar 11, loaded with technology.

If this project really sees the light of day, it is a safe bet that the brands integrated into it will be able to drastically reduce the price of their electric cars. Remember that the price of the battery is an important factor in the final price of an electric car. It is estimated that one kWh of battery costs around $100 to produce. Which therefore gives 7,500 dollars (about 7,000 euros) for a 75 kWh battery. By adding the margin and tax, we can quickly double this price.

avatar 11
avatar 11

By halving the purchase price, CATL could allow its partners reduce the sale price of its electric cars by several thousand euros, without affecting its margin, and therefore its profits. What to give them weapons, in the price war that promises to be fierce and that Tesla has started with a drop of more than 10,000 euros on its Model 3 and Model Y.

An anti-competitive practice?

However, we can wonder about the merits of this project, if it is only about certain privileged partners. Wouldn’t this be unfair competition set up to serve certain major players in the industry, such as Tesla, but also the Chinese BYD (which is number 2 in the electric car, behind Tesla and a competitor to CATL)? We could also see it as an attempt by China to put spokes in the wheels of European or American players.

The latter then have every interest in firing on all cylinders to massively reindustrialise their countries, in order to produce lithium batteries (or non-lithium for that matter) locally. There are many projects going on all over Europe, either with Volkswagen for example or Northvolt, but also in the United States with Ford and… CATL!

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