CATL has cut LFP battery prices by 20% in the past few months alone, allowing Tesla to continue its price war that is still destroying the profit margins of Chinese automakers. Nickel-based batteries have also fallen in price significantly.
Just last May, Tesla’s battery supplier CATL was preparing to warn its clients that it will have to split the drastic rise in lithium costs with them, as it could no longer absorb it without raising the price of its cells despite all contracts. Fast forward a year, and CATL had gone in the opposite direction, slashing the price of its phosphate batteries – of the type installed in the new Model 3 Highland – by the whopping 20%.
The nosedive in the price of battery-grade lithium carbonate that saw it plunge up to 80% from its highs last fall, has also led to a drastic 19% reduction in the price of nickel batteries of the type Tesla puts in its performance vehicles like the Model S and Model X, or the Long Range Model 3 and Model Y variants. These and other cost savings allowed Tesla to commence a price war at the beginning of the year, which continues to this day as it just squeezed the Model X under the tax credit price threshold.
While Tesla’s electric vehicles have fallen in price more than 30% from their peak last year, the competition finds it hard to keep up. In China, while interviewing industry execs, auto parts suppliers, and workers, Reuters found salary cuts, drastic cost savings, and even factory closures as consequences of the brutal price war that has engulfed the world’s biggest car market this year.
Some automotive industry workers in China are seeing their salaries cut almost in half compared to when they started as local companies go into frantic cost reduction mode in order to remain competitive or simply survive. According to one of them, who this summer started taking home 4,000 instead of 7,000 yuan a month: “Some factories exhaust you and are willing to pay you more. Some factories exhaust you, but are stingy. Some factories don’t exhaust you, but starve you as salaries are too low.”
Tesla, in particular, was found to be at the very high end of the hourly wage range at its Shanghai Gigafactory, but even industry juggernauts like Tesla and CATL – the world’s biggest EV and battery maker, respectively – have slowed hiring in the aftermath of the industry’s price war.
Instead of the annual 3%-5% cost cut requests to suppliers, as was the norm before, automakers like Tesla have requested 10% reduction once already, and they are seemingly not done. Even then, the average profit margin of Chinese car makers slumped drastically to 4.9% this year, with Tesla and BYD being about the only bright spot due to their disciplined cost controls and vertical integration.
Daniel Zlatev – Tech Writer – 881 articles published on Notebookcheck since 2021
Wooed by tech since the industrial espionage of Apple computers and the times of pixelized Nintendos, Daniel went and opened a gaming club when personal computers and consoles were still an expensive rarity. Nowadays, fascination is not with specs and speed but rather the lifestyle that computers in our pocket, house, and car have shoehorned us in, from the infinite scroll and the privacy hazards to authenticating every bit and move of our existence.