SHANGHAI, Apr. 15 (SMM) – SMM sources report that Tianneng Power and Chaowei Power – two giants in the motive battery segment – both cut the price of electric bike batteries RMB 2 each, or RMB 8/set, in early April.
Since Tianneng and Chaowei collectively dominate the electric vehicle battery market, this move has had a significant impact on vehicle battery prices. Tianneng and Chaowei already dropped the price of electric bike batteries 30% late last year. Tianneng then attempted to avert a price war by taking the lead to raise battery prices in January. Chaowei, however, did not follow suit such that the net effect was that prices did not rise. When combined with poor battery sales, the price of 12V12AH batteries remained mired around RMB 330-340/set in late March.
The early April RMB 2/unit (RMB 8/set) price cut on 12AH batteries, then, precipitated a 3% fall in electric vehicle battery prices to RMB 320-330/mt.
Weak demand and falling lead prices are the two major factors driving battery producers to cut prices. Electric vehicle battery sales have been tepid since the latter half of last year due to the slow recovery in the global economy and severe overcapacity. Tianneng and Chaowei both announced growth in the capacities of 20% and 60.7%, respectively, in their annual reports, significantly contributing to this excess of capacity, especially against sluggish consumption. The onset of the 2Q low-demand season for electric bike batteries will exacerbate this.
Spot lead prices, 80% of battery production costs, fell to RMB 14,200/mt in April from RMB 14,900/mt in early February, further undermining the possibility of a rebound in battery prices. Purchasers, many of whom bought when prices were rising, moved to the sidelines when lead prices fell, dampening battery demand.
Some larger electric vehicle battery producers in Jiangsu and Zhejiang have followed Tianneng’s and Chaowei’s price cuts. Prices in north China, including Shandong and Tianjin, have remained stable.
SMM believes China’s larger battery producers may have cut battery prices to reignite a price war in the lead-acid battery industry so that they may capture an even larger share of the market. Despite the decline in lead prices, battery prices are already quite close to costs for many companies. Further price declines will deal a heavy blow to SMEs. Though regrettable and immediately disruptive, this will help eliminate inefficient capacity from the lead-acid battery industry and will help accelerate consolidation within the industry.
Falling prices keenly reflect weakening demand for batteries. Weak demand means that spot lead prices will find little support in the short term.