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BYD to raise battery prices 20% as lithium costs soar fourfold

Chinese EV giant to cancel pending contracts, potentially hitting other makers

A bus is prepared for delivery the BYD electric bus factory in Lancaster, California, U.S., on July 1.   © Reuters

Chinese electric vehicle and battery maker BYD will increase the price of battery products by at least 20% effective Nov. 1, the company said on Monday in a letter to clients.

The move is further evidence that inflation is hitting producers and subsequently consumers. The costs of raw materials to manufacture lithium batteries has soared this year as a result of surging demand for EVs and China's energy crunch.

Prices of lithium cobalt oxide for cathode materials -- key to producing EV batteries -- more than tripled since December, while the price of electrolytes rose by more than 150%, leading to a significant increase in BYD's costs, the company said.

The higher prices affect new orders, and all unexecuted existing contracts will be canceled, BYD said in its letter. The company declined to comment.

BYD's C08M lithium batteries are mainly used in the company's own electric cars, but the price increase will include lithium batteries and lithium iron phosphate batteries that are supplied to other EV brands, according to analysts at CSC Financial.

BYD supplies vehicle batteries to Toyota, Beijing Automotive Group and Ford Motor.

The price of lithium has more than quadrupled in China over the past 12 months to a record high. Prices for battery-grade lithium carbonate jumped 360% year on year to 192,500 yuan ($30,158) per ton on Monday, according to research institute Shanghai Metals Market. Analysts say they expect prices to remain elevated, backed by heavy demand.

Soaring prices are burdening some smaller players in the battery industry that struggle to pass on higher costs to carmakers. This has led some manufacturers to either cut output or stop taking new orders, a source in the lithium industry told Caixin.

As EV manufacturers have strong negotiating power, the rising cost of raw materials has been mainly borne by midstream cathode material factories, and only a small part of the pricing pressure has been transmitted to downstream battery makers, an industry insider told Caixin.

Some midsize to small battery manufacturers have already announced price hikes, including Guangzhou Great Power and Jiangxi Neutron Energy.

Guangzhou Great Power raised prices on new orders on Oct. 13, citing higher costs of raw materials, and said it will suspend supplies to clients with overdue payments. The company's clients include SAIC-GM-Wuling Automobile, a joint venture between SACI Motor, General Motors, Liuzhou Wuling Motors and Changan Automobile.

"With the rising price of raw materials, battery factories are not making a profit," said the head of a battery factory that recently increased prices. "We can't stop production, and raising prices is our only choice." Based on previous agreed sales prices and current material prices, the factory will lose 10% on each battery, the person told Caixin.

The recent price increases by battery makers mainly target small and midsize customers, since large clients usually sign long-term agreements, said Wu Hui, general manager of the research department at the China Yiwei Institute of Economics. Leading battery maker Contemporary Amperex Technology, known as CATL, has not announced any price changes.

Rising costs have already hurt battery makers' bottom line. BYD reported that its 2021 first-half gross margin declined 4.4%, even though power battery revenue increased from a year earlier. CATL reported a 3.5% decline in gross margin.

Both BYD and CATL have locked up a significant part of their purchase prices with raw material producers and are less exposed to price fluctuations compared with smaller battery factories, Yiwei Institute's Wu said.

Lithium mining company Youngy said it signed 460 million yuan ($72 million) of supply contracts for lithium equipment and lithium salt products with BYD this year -- far exceeding the 77 million yuan of contracts in 2020. Youngy Chairman Lv Xiangyang is vice chairman of BYD.

CATL has also stepped up efforts to secure a global supply of key battery components. In September, CATL agreed to acquire Canada's Millennial Lithium for 376.8 million Canadian dollars ($297.3 million). The deal, which will give CATL access to Millennial's lithium mining sites in Argentina, followed a $240 million purchase of a 24% stake in a lithium project in the Democratic Republic of the Congo.

CATL also invested in another Argentina-focused lithium company, Neo Lithium, as well as in Greenland-focused North American Nickel and Australia's Pilbara Minerals.


Read also the original story. is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei has an agreement with the company to exchange articles in English.

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