Chinese EVs get squeezed by rising lithium price and falling subsidies
The price of battery-grade carbonate lithium in China has increased over 700% in just a year.
The rapid rise was partly a result of the growing demand for EV batteries in recent years, as China maintains the largest EV market in the world.
Photo: Oilai Shen/Bloomberg via Getty Images
Zeyi Yang
China's electric vehicle manufacturers are currently feeling the squeeze from rising costs and lowering government subsidies. The steep increase cost for in EV battery materials, particularly lithium, is jeopardizing the otherwise booming industry.
The price of battery-grade carbonate lithium in China has increased by over 700% in just a year, from $7,900 per ton in early 2021 to $66,300 per ton this month, according to Chinese financial publication Caijing. Other important components, including cobalt and nickel sulfate, have also witnessed a significant price surge.
The rapid rise was partly a result of the growing demand for EV batteries in recent years, as China maintains the largest EV market in the world. While EV companies and battery makers are ramping up their production capacity, domestic lithium supply can't keep up with the pace, thus skyrocketing materials costs. Some Chinese companies have turned to bid for overseas lithium mining company acquisitions to secure supply.
Meanwhile, the government subsidies for EVs have gone down 30% this year as part of a planned phase-out program.
Feeling the pressure from both directions, several EV brands have raised the retail prices of their models. In an extreme situation, Ora, a Chinese low-priced EV manufacturer, has ceased the sales of two EV models. "With each car sold, [the company] loses about $2,700," Ora's CEO Dong Yudong told Caijing.
Zeyi Yang is a former reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
lithium battery electric vehicles china