China’s CATL, the world’s largest EV battery maker, is making waves in the industry with its new cost-cutting initiative. The company is offering significantly lower battery costs to some of its Chinese EV makers, including NIO, Li Auto, Huawei, and Zeekr. This deal will settle a portion of the price of power supply with automakers based on a price of RMB 200,000 [$29,116] per ton of lithium carbonate for the next three years.
At the same time, automakers signing the partnership will be required to commit about 80% of their battery purchases to CATL. This program will be implemented in the third quarter of 2023, and CATL has asked its material suppliers for a 10% price cut.
The news comes as lithium carbonate prices have been falling since the end of 2022. Morgan Stanley expects lithium carbonate prices in China to be at $67,500 per ton in the first half of 2023, falling to $47,500 per ton in the second half of 2023. This implies a 35% decline from spot prices at that time.
Tesla – CATL’s largest customer – is not among CATL’s “strategic client” group, and Tesla has a gigafactory in Shanghai. However, Ford recently announced a $3.5 billion Michigan LFP battery factory – with CATL – in 2026. The two companies announced a Global Strategic Cooperation covering battery supply in North America, Europe, and China in July 2022.
The lithium market is expected to double by 2030 as EV demand accelerates. CATL’s cost-cutting initiative could be a major boon for Chinese EV makers, allowing them to reduce cost pressures and remain competitive in the global market. It remains to be seen how this move will affect other EV makers around the world.
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