Author: Su Qin
Introduction: BYD battery price increase is a pseudo-proposition.
Today, a letter announcing the price increase of BYD battery was circulated in the market.
The letter shows that due to market changes and the compounded effects of power and production restrictions, lithium battery raw material prices have continued to rise in 2021 compared to December 2020, with the price of positive material LiCoO2 increasing by more than 200%, the price of electrolyte increasing by more than 150%, and the supply of negative material being continuously tight, leading to a significant increase in BYD’s comprehensive cost. Due to the actual situation of the rise in raw material prices, BYD has decided to raise the unit price of battery products such as C08M.
Specifically, the product price including tax will be uniformly increased by no less than 20% on the basis of the current Wh unit price, and the new price will be fully implemented from November 1st. As of November 1st, all old contract orders that have not been executed will be uniformly closed and cancelled. In response to this, an insider from BYD told the media that the above information is being verified and cannot be commented on for the time being.
As is well known, with the rise in international market prices of bulk raw materials this year, especially the shortage of lithium ore supply, it is highly probable that the price of power batteries will rise. However, since BYD has both vehicle and battery businesses, the impact of this price increase on the market is different from that on independent lithium battery suppliers.
According to insiders from BYD, the supply of BYD’s batteries to its own vehicle business is already very tight, and car owners generally have to wait for six months to get their cars, while internal employees also do not have obvious delivery advances. According to the insider, in the case of tight self-supply, the proportion of outside supply will be very small.
It is a well-known secret that BYD’s external supply of batteries has been very small, so the proposition of the price increase of BYD’s batteries is a pseudo-proposition in itself.
Taking the C08M battery in the letter as an example, it is reportedly an automotive-grade energy storage ternary battery, with BYD supplying 99% of its production capacity and the other 1% being supplied by external sources. In other words, the price increase of BYD’s batteries this time is just a big piece of news, and has little impact on the supply relationship in the battery market.
Of course, it is also great to use this wave of traffic to boost the stock price. On October 26th, BYD’s share price (1211.HK) opened 5.35% higher at HKD 319, while BYD (002594.SZ) opened 4.14% higher at RMB 330.5, both hitting record highs.Before the signature date of October 25th in the letter, Tesla released its third-quarter financial report on October 20th, and stated: “We will transition to lithium iron phosphate (LFP) batteries for the standard range models worldwide.”
This has also sparked speculation in the industry that Tesla may expand the coverage of LFP batteries to other vehicle models and increase the number of suppliers to ensure supply chain security and bargaining power. Currently, the LFP battery used in the standard range model produced by Tesla’s Shanghai super factory is supplied by Chinese battery manufacturer, CATL.
According to the latest reports from domestic media, Tesla may have reached a 10GWh battery procurement agreement with BYD, a volume sufficient to equip 200,000 units of 50 kWh batteries annually, with Model Y being the first model to be equipped with BYD LFP blade batteries.
With the general rise in bulk raw material prices, the increase in the price of power batteries is also expected. However, what is more important for BYD is to quickly increase battery production capacity, seize the good situation in the current competition pattern of new energy vehicles, and not let consumers give their first-mover advantage to competitors due to the long waiting times.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.