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Recently, the life of battery companies has been very difficult, especially due to the impact of raw material prices, "Zhang Feng, Senior Vice President and Secretary of the Board of Directors of Funeng Technology, said in an interview with First Financial reporters at the 2022 Hundred People Conference Forum on March 27th.

Public data shows that in 2021, the price of lithium carbonate in China increased from 50000 yuan per ton at the beginning of the year to 500000 yuan per ton at the end of the year, with a price increase of 10 times in one year, putting pressure on battery companies and new energy vehicle companies. Wan Gang, Chairman of the China Association for Science and Technology, stated at the Hundred People Conference that since the second half of last year, the price of power lithium battery materials has rapidly increased, deviating from supply and demand, and there has been an abnormal increase.

On the one hand, the rapid rise of new energy vehicles has ignited the demand for power lithium batteries, while the expansion cycle of lithium mines and other products is relatively slow, and the mismatch between supply and demand has led to an increase in raw material prices; On the other hand, some battery manufacturers are experiencing panic and locking in production ahead of schedule, resulting in a significant trampling effect on the supply chain. The rise in raw material prices has forced battery companies to raise prices, and with the strengthening of the power lithium battery as a core component supplier's voice, the game between car companies and battery manufacturers has also undergone some changes, and the rules of price negotiations have changed.

A customer has raised a price red line

At present, except for a few large customers, the price increase has been completed, basically a one go price, "Zhang Feng told reporters. From the perspective of the price increase timeline, the price increase began on January 1st of this year, and the price negotiations were already completed in November and December of last year. The current raw material prices have further increased, so we are also negotiating with individual customers to share the price increase from January to the end of March this year with them. We are currently in the process of negotiating the second round of price increases

At present, several battery manufacturers, including CATL, Funeng Technology, and Bike Battery, have completed price adjustments. However, the pace of price adjustments varies among battery manufacturers. Liu Jincheng, Chairman of Yiwei Lithium Energy, stated in an interview with a reporter from First Financial that material prices rose even faster in the first quarter of this year. At that time, he hoped to smooth out the rapid fluctuation of prices, so he did not make arrangements for price increases quickly. But after analysis, this price level will still stabilize for a period of time, so we are actively discussing prices with important customers and have reached a consensus. The prices of important customers will be adjusted in March.

Regarding the specific extent of the price increase, Zhang Feng stated that it is not convenient to disclose, but he stated that they are all above 25%. Recently, a person in charge of a new energy vehicle company told a reporter from First Financial that since the second half of last year, the price of CATL lithium-ion batteries has increased twice. Based on the cost of a new energy vehicle's battery, it has increased by 10000 yuan last time, and recently it has also increased by 10000 yuan.

At the end of 2020, the price of lithium iron phosphate was 0.68 yuan/Wh, and now it is 1.4 yuan/Wh, which has doubled. Generally, the cost of batteries accounts for about 40% of the total vehicle cost, which means that due to the increase in raw material prices, the total vehicle cost has increased by 40%. "An industry insider who declined to be named told a reporter from First Finance.

Since last year, the phenomenon of tight battery supply has begun to occur, which has also led to multiple new energy vehicle companies delaying delivery. The reporter learned that the production lines of multiple battery factories are currently full, and battery supply is still tight. Zhang Feng told reporters that it is difficult to lock in battery production this year because production and supply are currently very tight. Taking Funeng Technology as an example, this year's production has been completely outsourced, with no more. Next year will also be very tight, and Funeng Technology's battery production has just met the needs of Daimler and GAC, which are not very enough.

At this stage, we have significantly experienced changes in the market, including energy storage batteries. Some important customers have clearly raised price red lines, and beyond a certain price, we cannot continue. Based on this judgment, we believe that the supply side price should be near the high point, "Liu Jincheng told reporters.

From the performance of CATL, a leading battery company, and battery raw material companies, it can be seen that many companies saw a significant increase in profits in 2021, earning a lot of money. Taking CATL as an example, its released performance forecast shows that the expected net profit for 2021 is between 14 billion yuan and 16.5 billion yuan, a year-on-year increase of 150.75% to 195.52%. But on the other hand, new energy vehicle companies have not yet emerged as truly profitable companies.

From the situation in 2021, the prices of battery raw materials began to rise continuously, but at that time, battery companies did not transmit cost pressure to car companies, and most of them chose to self digest. Now that prices are rising too fast, we also need to appropriately pass on the pressure of price increases to our customers. After all, this is a market behavior, and we have no way to digest all of this price. Fan Wenguang, Vice President of Shenzhen Bike Power Lithium Battery Co., Ltd., told reporters that we are strengthening the utilization of recycled materials with upstream raw material suppliers, and this proportion will continue to increase in the future. At the same time, we will accelerate the development of alternative systems, We are also developing new suppliers or technological routes. In addition, observe the appropriate timing to seek a safer supply chain through external equity investments, such as acquisitions or joint ventures.

When lithium carbonate reached the level of around 500000 yuan, the procurement of energy storage users had already been somewhat divided and shaken, and the supply and demand relationship may have limited the price increase of materials due to the behavior of end-users. Therefore, I believe that the price of materials should be around the high point by this stage, "said Liu Jincheng.

Price negotiation rules have changed, and prepayment has become the norm

Fan Wenguang believes that there are two important factors for this round of price increase. Firstly, the large release of demand has pushed up the prices of raw materials, and the global pandemic has also had a very negative impact on the raw material market. This has caused a certain trampling effect on the supply chain, and some battery factories have locked in production out of panic. Secondly, individual players hoard and contribute to the situation, causing raw material prices to skyrocket, which has already spread throughout the entire industry chain. We are working closely with upstream suppliers to adjust the pace of procurement in a reasonable manner, such as slowing down the pace at high prices, delaying buying and selling, and not promoting or assisting the stampede effect. Everyone has inventory or support in the early stage, so avoid high prices, "Fan Wenguang told reporters.

The rise in raw material prices is too outrageous. In mid-2021, a lithium carbonate manufacturer told me that their expected price was around 120000 yuan/ton, and now the price has reached 500000 yuan. Some people must have taken advantage of this and profited excessively from it, but this irrational price increase is difficult to sustain. Recently, we have seen that downstream companies have not received high prices of lithium salts, and policy related upstream material prices will also be adjusted Close the regulation. Yu Qingjiao, Secretary General of the Zhongguancun New Battery Technology Innovation Alliance and Chairman of the Battery Hundred People Association, told reporters from First Finance and Economics.

It is worth noting that with the arrival of the era of new energy vehicles, the core component supplier of power lithium batteries is becoming increasingly important. From the current market perspective, CATL is still dominant, which has caused subtle changes in the relationship between component and host manufacturers. In the past, the main engine manufacturers were relatively strong and held the right to speak in their relationships with component companies. However, due to the tight supply chain of batteries and the concentration of head effects, the discourse power of battery factories continues to increase. At present, in order to ensure stable supply, many car companies make prepayments to battery factories. And some car companies have also borne the corresponding costs due to the increase in raw material prices in this round.

Since last year, under the contradiction between supply and demand, the phenomenon of locking orders for minerals, diaphragms, positive electrode materials, lithium battery equipment, and especially lithium hexafluorophosphate has been obvious. However, according to the company's announcement, the two parties involved in cooperation will not explicitly lock in the sales price of the product, and the final order price needs to be negotiated by both parties. Moreover, as far as we know, the price negotiation rules have also changed. For example, some battery companies have quarterly pricing and price openings The payment methods have also undergone significant changes, and prepayment has become a common phenomenon. For example, Funeng Technology and Guoxuan High Tech received prepayment lock orders from overseas car companies last year. Yu Qingjiao told reporters.

At present, although CATL is still the dominant company, the partners of the main engine factory are no longer limited to one. In the near future, the new leading car manufacturers NIO, Xiaopeng, and Ideal have all invested in the battery company Xinwangda.

There was once a new force in the car industry that requested customized production, but it was not easy to operate and the negotiations between the two parties did not fit well. Therefore, this new force in the car industry approached other battery companies and made some progress. After receiving relevant information, the company was afraid of being taken away from the order, so they went to talk to the team of this new force in the car industry, and ultimately provided them with some customized methods. "Li Meng, an insider at a leading battery company, said (pseudonym) told reporters that in previous supply chain relationships, car companies were relatively strong. They didn't want to let battery suppliers dominate, so they would rather use money to support other battery companies. This way, there would be some comparison when negotiating prices and other aspects with battery companies.

Li Meng stated that when battery companies negotiate prices with battery manufacturers, they adjust them based on the ordering situation of different manufacturers. Some manufacturers sign long orders, resulting in lower prices. However, if a long-term order is signed, the price is not fixed at once, and is generally phased in quantity.

With the acceleration of electrification, the zeroing relationship has become very delicate, and the game of interests among all parties is definitely inevitable. The specific allocation ratio has not been understood, but car companies will consider the rise of various raw materials and adjust battery costs when raising prices. To ensure the stability of the supply chain, it will definitely leave some profit space for upstream suppliers, "Yu Qingjiao told reporters.

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