The price of lithium battery cells will rise by 5% and 15% at the beginning of next year.

According to Taiwan's Electronic Times, battery module factories have been informed that the price of cylindrical lithium battery cells will rise again early next year, an increase of 5%, 15%, due to rising downstream demand for electric vehicles and energy storage, and the trend of battery price increase may continue until 2023.

Although overall battery prices have fallen this year, battery prices have actually been rising since the second half of the year.

NMC batteries currently cost nearly $110 per kWh, according to Bloomberg statistics. Q4 is expected to cost $10 more per kWh than Q1. The domestic price of lithium iron phosphate battery, which is famous for its high performance-to-price ratio, has risen by 10% and 20% since September.

Multiple factors support the price of lithium battery

Since the beginning of this year, the market of new energy vehicles has continued to grow, which has formed an important support for the price of lithium batteries on the demand side.

According to the latest sales statistics of the Automobile Market Research Branch of the China Automobile Circulation Association, retail sales of new energy passenger cars reached 321000 in October, up 141.1 percent from a year earlier and down 3.9 percent from the previous month. From January to October, retail sales of new energy vehicles were 2.139 million, an increase of 191.9 percent over the same period last year.

The increase in the price of upstream raw materials also has an impact on battery prices.

As of mid-November, the price of battery-grade lithium carbonate was 19.5 yuan per ton, up more than 230% from the beginning of the year. Yellow phosphorus and phosphoric acid, which are necessary for the production of lithium iron phosphate batteries, have increased by 280% during the year. The prices of rare precious metals such as nickel, cobalt and manganese are also rising, showing a situation in short supply.

Planned production capacity "blowout"

The strong demand for lithium batteries has also led to the expansion of the battery industry as a whole.

According to incomplete statistics, since the beginning of this year, power battery head companies, including BYD, Ningde era, Yiwei Lithium Energy and Honeycomb Energy, have announced that they have added more than 2TWH in the next five years, about 20 times the amount of cars installed this year.

The obvious difference with the previous round of production expansion is that the scale of production capacity has moved from 10GWh to 100GWh and 1000GWh (TWh). The industry expects that the lithium battery industry will blow out in the next five years.

The cost reduction process of electric vehicles may be delayed.

But until the plan is fulfilled, the continued rise in battery prices could be a drag on the cost-cutting process of the electric car industry.

NEF had previously predicted that the average price of the battery pack would fall below $100 / kWh, in 2024, when the price and profit margin of electric vehicles would be the same as those of fuel vehicles, even without subsidies, making them more cost-competitive.

However, in the expectation that the average battery price will continue to rise, the time point of achieving $100 may need to be postponed by another two years to 2026, while the popularity of electric cars, car companies' profits and energy storage projects will all be affected.