It Is Rumoured that Lithium Battery Cell Prices Will Rose 5-15% in Early 2022

SHANGHAI, Dec 6 - According to the Taiwan Electronic Times, battery module factories have been notified that the prices of cylindrical lithium battery cells will rise again by 5%-15% early next year due to the rising downstream demand for electric vehicles and energy storage, and the trend of battery price hikes may continue into 2023.

Although battery prices have fallen as a whole in 2021, the prices have actually been rising since the second half of the year.

According to Bloomberg, the current NMC (811) cathode material battery prices are close to US$110/kWh and are expected to be US$10/kWh higher in Q4 than in Q1.The lithium iron phosphate battery, which is known for its high cost performance, has increased by 10%-20% in China since September.

Multiple factors have underpinned lithium battery prices

The new energy vehicles (NEVs) market has been expanding since the beginning of this year, offering strong support for lithium battery prices on the demand side.

According to the latest sales figures from the China Automobile Dealers Association (CAAD), retail sales of new energy passenger vehicles reached 321,000 units in October, up 141.1% year-on-year and down 3.9% month-on-month. 2.14 million units of NEVs were sold from January to October, up 191.9% year-on-year.

Rising upstream raw materials prices also contributed to the battery price hikes.

As of mid-November, the price of battery-grade lithium carbonate was 195,000 yuan/mt, up over 230% compared to the beginning of the year. Yellow phosphorus and phosphoric acid, which are necessary for the production of LFP batteries, rose by 280% during the year. The prices of scarce precious metals such as nickel, cobalt and manganese have also risen, indicating that demand exceeds supply.

Production capacity are likely to balloon

The strong demand for lithium batteries has also led to an expansion of production capacity across the battery industry.

According to incomplete statistics, since this year, almost all of the first-tier power battery companies including BYD, CATL, EVE Battery, SVOLT announced the five-year production capacity expansion plan, which totals more than 2TWh, about 20 times the real installed capacity into vehicles this year.

The obvious difference from the previous round of expansion is that the scale of production capacity has evolved from 10GWh level to 100GWh or even 1000GWh (TWh) level. The industry expects the lithium battery industry to "balloon" in the next five years.

Electric vehicles’ costs will wait longer to see substantial reductions

However, the continued rise in battery prices could slow down the process of cost reduction in the EV industry until the production expansion plans materialise.

It was previously predicted that the average price of battery packs could fall below US$100/kWh in 2024, by which time, even without subsidies, the selling price and profitability of electric vehicles will be on par with fuel vehicles and will be more cost competitive.

But with average battery prices expected to continue to rise, the US$100/kWh pivot may be pushed back by another two years to 2026, and the EV penetration, carmakers’ profits, and energy storage projects will all be affected.