Tesla supplier drastically cuts its battery prices for everyone else
Thanks to the plunging costs of refined lithium, the Tesla supplier that produces cells for its standard range Model 3 and Model Y vehicles, is cutting the price of its batteries significantly in order to lock its customers in for the long haul. CATL is not extending the offer to Tesla, though, as it apparently considers its sales numbers too small in China.
The world's biggest EV battery maker is trying to lock its main clients like NIO or Li Auto, into 3-year contracts to get 80% of their batteries from CATL, in exchange for a drastic reduction of their prices. How drastic? Well, with the current price of lithium carbonate hovering around the US$60,000/ton spot, CATL is proposing a long-term contract at less than US$30,000. That half-price reduction of battery raw materials would lead to a significant decrease of the battery costs associated with manufacturing a vehicle for CATL's main customers. Recently, NIO complained that the cost of producing the 150 kWh battery for its long-range vehicles is so high, it is priced almost as much as its ET5 sedan, so NIO will rent the 620-mile battery for summer trips first rather than offer direct ownership.
Last year, CATL announced that it won't bear the price jump of battery materials and components alone, but they will be passed onto its clients like NIO in the form of higher battery costs instead. This left it with record margins among its peers, yet forced automakers which used to source their cells exclusively from CATL to look for alternatives and sign up a second or even a third supplier. With the current offer, which some have already signed, CATL intends to lock them in for the long haul and start a veritable price war in the battery realm just as Tesla started one in the EV industry.
As to why did CATL exclude Tesla from the lucrative offer to supply batteries that are up to twice cheaper in the next three years, recent comments by Charlie Munger give a clue. According to Berkshire Hathaway's Vice Chairman, their investment BYD, which he lobbied Berкshire to buy shares in a long time ago, is now selling way more than Tesla in China, the world's biggest EV market.
"Tesla last year reduced its prices in China twice. BYD increased its prices. We are direct competitors. BYD is so much ahead of Tesla in China... it’s almost ridiculous," added Munger. Since CATL is basing its battery price cut offer on future sales projections as well, it apparently expects that NIO and the other EV juggernauts it counts as clients, will keep outselling Tesla, at least locally.
Source(s)
36 Krypton via CNEVPost & CNBC
