Modern electric car batteries, by and large, require lithium carbonate. Even the cheaper iron phosphate batteries need the white salty stuff. Given the boom in electric car production, you might assume that the cost of lithium carbonate would go up or, maybe, slowly decline as mining increases. What you would not expect is the cost of the battery precursor to drop by 50% in a year, but that’s what the world’s biggest battery maker is promising will happen in an effort to keep its giant share of the market.
Ahem, excuse me?
Contemporary Amperex Technology Co Ltd, which everyone just calls CATL, is a name you should know. I keep bringing it up so you remember that name. CATL controls, depending on who you ask, about 37% of the total global battery market. That is a lot of the pie. Probably too much of the pie, given the importance of battery supplies for the future automotive world. It is, unsurprisingly, a Chinese company. The Chinese government has heavily subsidized the electric car market and the development of battery technology. This is important, too, and I’ll come back to that in a minute.
But first… WHAT?!?
CATL Seems To Want A Price War And It Wants To Win It
Let’s start with the big news and then try to then explain the news, which is generally what we do around here. NIO, a big Chinese electric carmaker, announced a week ago that it was going to build a battery facility of its own so it wasn’t reliant on suppliers for the key component of its cars.
Guess which company makes all of NIO’s batteries? That’s right, CATL, the same company that also makes Tesla’s batteries in China. It’s also teaming up with Ford to build batteries in Michigan. It’s a big company.
Unsurprisingly, according to this report from Reuters, CATL started offering discounts to Chinese automakers in a bid, presumably, to avoid losing market share. While there’s no specific proof linking the move to NIO’s decision, the timing is curious. It’s also good business. According to that same report, lithium carbonate prices were generally on a downward trajectory until last year, when prices jumped to $86,832 a ton in November. Since then, prices have gone down almost 30%.
What’s going on? Demand, for one. Chinese government subsidies for electric cars ended in January. The market should grow this year, but not at a crazy pace. Here’s the key bit, also from Reuters, that explains what CATL is really offering:
The discount offers included a clause that shocked the auto industry after a year of rising prices: a built-in assumption that prices of lithium carbonate, a key component in auto batteries, would more than halve, three of the people said.
The move shows CATL’s cost advantage from investments in lithium mining and refining, and its determination to knock back the challenge from smaller Chinese rivals such as CALB and EVE Energy which have factories ramping up this year, analysts said.
Ok, but what does CATL get out of it?
The offer to automakers, including Nio and Geely’s Zeekr unit, that was reported by Reuters earlier this month came with a catch: in exchange for the discount, automakers have to pledge most of their battery supply contracts to CATL, according to the three sources.
There’s probably no other battery maker in the world that can match that offer. Maybe LG? Maybe.
What CATL appears to be doing is flexing its big muscles while it can, while it thinks there’s going to be a dip in Chinese growth, and when it doesn’t expect smaller companies (like Zeekr) to suddenly open plants. The automakers that are being considered are not giant players, so that probably lessens the risk to CATL if it’s wrong about lithium prices. I can’t imagine it would make a similar deal with Tesla.
There’s more analysis of this here if you’re curious, from Reuters, who has been on this story from the jump.
Rivian’s Not Great Investment Call
Rivian makes an attractive truck and an even more attractive SUV. It makes a cool little delivery van for Amazon. The biggest issue, at the moment, is that Rivian doesn’t make any of those fast enough for Wall Street. The company’s stock, which already dropped 80% in 2022, is having another rough day as it missed estimates for earnings in 2022 and forecast production of just 50,000 vehicles in 2023.
Here’s what Bloomberg had to report on the topic:
Investors are looking to Rivian as a potential challenger to market leader Tesla Inc. The upstart’s November 2021 public listing was the sixth-largest in U.S. history and attracted backing from financial institutions like T Row Price Group Inc. in addition to Amazon.com Inc.
The company quickly hit problems as it tried to ramp up production amid parts shortages, and ultimately fell short of a target to build 25,000 EVs across three product lines: consumer plug-in pickups, sport utility vehicles and an electric delivery van for Amazon.
You can read the investment letter here, which points out that making cars has been harder for Rivian than they expected.
We believe the supply chain will continue to be the main limiting factor of our Normal facility output. Our team continues to work on the introduction of new engineering design changes and key technologies which will take effect during the second half of 2023 to help mitigate anticipated supply chain constraints.
Good luck.
Hyundai And Kia Still Killing It
It’s the beginning of the month and Hyundai, Kia and Genesis are the first to report February sales, as usual. The numbers? Unsurprisingly, the brands are still high-fiving angels.
Automotive News has a full roundup, but some key numbers include a 9% year-over-year increase for Hyundai, a 24% year-over-year boost at Kia, and a 21% rise for Genesis.
Another key tidbit from TrueCar via Automotive News: The average transaction price in February was still up 5.2% over last year, so prices aren’t dropping and incentives aren’t rising to a point where consumers will start seeing any major relief.
A quick look at Hyundai’s full sales release does bring out some interesting data, specifically that the extremely good Hyundai Elantra N saw a 72% increase in sales. Hell yeah.
The Big Annual VW GTI Festival Is Moving To Wolfsburg
For years, dash-stroking VW nerds would get their Das Auto on at the beautiful Lake Wörthersee in Austria as part of the big GTI Festival. The locals put the kibosh on that, stating they didn’t want to be associated with gas-powered cars anymore and instead wanted to promote an atmosphere of sustainability.
That meant that this year’s event was cancelled. Good news for VW fans, though, as the event will come back in 2024 to Volkswagen’s home in Wolfsburg. From Volkswagen:
“Our GTI fans are of great importance to Volkswagen and that’s why the exchange with them is very dear to us,” says Imelda Labbé, Member of the Board of Management for Sales, Marketing and After Sales at Volkswagen Passenger Cars. “For this reason, after the GTI Meeting at Lake Wörthersee was unfortunately cancelled, we decided pretty quickly to offer the GTI fan community in Wolfsburg a new home for the event. When planning the event, we also want to take into account the ideas of the fans, because it should above all be a meeting for them. Accordingly, we will certainly be able to offer some highlights and surprises in the coming year.”
Good for them.
[Editor’s Note: I attended VW’s “Coming Home” GTI car show at Wolfsburg back in 2017. It was legit. -DT].
The Big Question
Is this lithium price war a net good thing, or just another example of how far ahead the Chinese are with battery production and technology?
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Photos: CATL, NIO, VW, RIVIAN
Re: Recycling… The cost of recycling any non biodegradable (let’s say anything that takes longer than its projected service life to degrade) object should be mandated to be set aside in some type of trust fund at the time of sale. Recycling centers can receive the no-longer-useful object and bill the trust fund after documenting the recycling process.
CATL : China Corp ( because that’s what it is, since everything is controlled more or less tightly by the CCP ) pulled a similar trick a several years ago when Europe ( and especially Germany ) started to develop and produce solar panels.
They cut their prices and made sure the prices were lower than any western concurent.
The end is obvious : they killed any investment and industrial development in solar panel production except in a few places where economic protections were already in place.
We need a new car soon, and Kia actually has hybrids and PHEVs on the lot to buy. A friend just bought a Niro PHEV and it is pretty sweet. I would never have considered Kia, but Toyota and Honda have no inventory at all. We can’t buy a car that doesn’t exist, so we will probably end up with a Sorento.
A big factor on Hyundai/Kia sales is that they actually have cars on their lots ready to buy right now. I don’t know what their supply line situation is but they seem to be able to bolt some cars together. Even at MSRP immediate delivery is a big inducement.
Glad to see the GTI meet found a home. I feel like VW cares about us older-car owners, which honestly makes me more inclined to pay attention to their newer stuff even though it uses the devil’s piddle (coolant) in the engine bay. It’s a good move on their end, for sure.
Man, there was a Type 4 meet I saw around Wolfsburg on Instagram a while back, and…swoon. So many cars like mine! I’m usually the only one even at aircooled shows here, so I would legitimately lose my mind just to see SEVERAL at once.
All those H/K owners whose cars got stolen and trashed because the manufacturer was too cheap to install immobilizers needed to buy new cars with their insurance checks. No wonder H/K sales are up.
Oh and times are hard and interest rates are high, so people buy cheaper cars.
has nothing to do with perceived quality when so many other manufacturers are having known quality issues?
I hope Rivian succeeds. At least they behave like a real car company run by adults. They should make an R1W wagon too 😀
VW should move the GTI festival to Puebla 😛
A lithium price war is good or bad depending on who you ask.
It will ultimately be good for consumers as it will drive down the cost of BEVs.
It will be bad for battery makers that are not vertically integrated with their own direct mining company ownership.
And it should be noted that Tesla has been preparing for something like this with their own Lithium mining company investments and supply agreements.
I had never heard of the GTI Meeting before reading this, but now it’s totally a bucket list event for me to witness the inevitable debauchery & tomfoolery if nothing else.
Speaking as a mineralogist I… have no real grasp of how this can or should play out. Spodumene is pretty cool, though. I am very much in favor of spodumene both as a mineral and as a mineral name.
I’m glad Hyundai/Kia/Genesis are doing well…but I’m sure not seeing any of it. I run my car through KBB’s stuff periodically just to keep track of how much equity I have in it/monitor the market and it’s gone down like a lead balloon. I bought the car with roughly 9 grand in equity and I’m currently sitting around 6 after 9 payments. The Elantra N is selling well but the Kona N sure isn’t, they’re all over the place with money on the hoods and you can get 2022s in the 20s already.
Oh well, I bought the car to enjoy it, not as an investment…and I accepted that I was buying an oddity and the risks that come along with it. It still doesn’t feel great though…and I can’t even imagine what all the dingbats who bought them at over sticker are thinking right now haha.
The Tik Tok stealing spree isn’t helping either. My car is push button start so it can’t be stolen with the hack, but alas. Reality vs perception.
Monopolies are never a good thing for the consumer, not in the long run. Chinese monopoly? Hell to the fuck no.
I wonder how many tourist euros Lake Wörthersee is going to be losing from that decision. Feels kinda… petty?
It’s a beautiful area but they make some strange rules – like no motorcycles on certain roads on the weekends. I think the locals are probably just fed up with people using their local roads as racetracks and they are more comfortable saying it’s because of the environment. Sort of reverse greenwashing.
Serious kudos to VW for inviting it back to Wolfsburg. That’s showing some serious dedication to the fanbase there.
I have no doubt that knobs in the crowd are probably what ruined the other Wörthersee meet (or at least put the NIMBYism in motion), though. Hell, we lost one of our autocross venues lately from nerds who didn’t even come to our event, but who started hooning in the same lot after hours anyway. Some alleged “car people”—the ones who can’t control themselves—just ruin everything.
Reminds me of the second season of Clarkson’s Farm. Small minded village people not wanting to help farmers. Ef them. I’m not a huge fan of Jeremy and his stupid mouth, but his Farm series is quite good. And that is down to Kaleb and Charlie and marble mouth Gerard. It brings home the amount we take for granted here, and what we owe those who bring food to our tables.
I understand about 1 in 4 words coming out of Gerard’s mouth, but he’s my favorite guy on the show (Caleb’s a close second.).
It’s the English version of Boomhauer.
Sounds like they’re sick of being the Ocean City of Europe.
I get a bad gut feeling about all the lithium mining that is/will be happening. To me, it seems that we’ve passed the point of no return of gutting the whole Earth of it.
Even if there was some massive breakthrough in battery chemical composition, I’m not even sure it would be accepted or adopted for a long time. Not with all the money to be made of Lithuim and what has already been spent on it.
Shit, It takes a long time for one government to adopt a new way of thinking. Multiplying that by basically every country in the world…that’s like trying to do a figure 8 maneuver with a freighter in the Suez Canal.
I’m obviously no scientist, nor have I ever even slept at a Holiday Inn Express, but the whole Lithium mining “explosion” seems antithetical to a “Green Agenda.” I might be wrong about all of this, but that’s my two cents on the topic.
Antithetical is great word usage. Also, I agree with your point.
In a vacuum, yes any mining of anything isn’t great for the environment. But, context matters, and oil extraction, refining, and disposal (i.e. venting as combustion exhaust) are also very “antithetical to a Green Agenda.”
True to the extent that oil, natural gas, coal, etc. are getting pulled from the Earth all day, every day. And those aren’t exactly helping the situation. We can’t just create energy/materials out of nowhere. But, at least those are somewhat regulated in most places. Lithium is in its “Wild West” era of unbridled greed and expansion and it’s dangerous. Particularly in the areas of the world where it is most abundant, like South America. South America isn’t exactly known for its environmental preservation policies. And China isn’t exactly a picnic for miners, either. You get the point.
I feel that we are ordering a pizza that now has way too many double-portion toppings on it. Nobody likes a thin-crust pizza with 2 pounds of toppings on it unless they are a masochist.
I just think that this ends badly. That’s all.
Don’t worry. All that mining equipment still runs on dino juice and is likely to have no emission controls what so ever.
There’s definitely issues with lithium extraction, but it’s likely still a significant net benefit compared to petroleum extraction. Look at it this way: a battery might have 50lbs of lithium in it. After, say, 200,000 miles some portion of that lithium’s recycled and the rest is essentially waste. So something like 5-10lbs of lithium “used”. An ICE vehicle during that time will burn about 40,000lbs of gas (or closer to 45-50K lbs of crude). On the order of 10,000x as much. And that’s ignoring stuff like CO2.
It sounds to me like CATL is dumping lithium to drive out the competition and lock in customers, and the WTO generally frowns on that practice.
The WTO treats China with kid gloves, China never met the requirements to join the WTO but was let in anyways because ‘Why not, what’s the worst that can happen?…….’
And who can say what subsidies the government will be providing without telling anyone? It’s easy when the government controls everything.
What will happen is everywhere will enact huge tariffs on them just like they did with solar panels. It’s the beginning of games to get around the US EV credit rules. Forcing manufacturers to decide between credit eligible or cheap battery.
Good point! This sounds like the real answer.
Lithium war: will this make the prices for my prescription less?
Probably just balance everything out…
Only half the time.
I hope every single GTI fan at the festival takes the time to give VW an earful for butchering the dashboard of the latest generation. And those goofy headlights. Yuck.
The lithium price war was coming and they just got ahead of it. Too much supply should be opening in the near future for companies not to try to undercut each other. It’s a bold strategy to start the war before the supply, but it might be an easy choice if they already have contracts with large mining operations.
That said, trying to mine as cheaply as possible isn’t great for a lot of reasons. Labor conditions, the environment, etc. And the refining is likely to be done on the cheap, too. All that was likely anyway, but pushing a price war is likely to exacerbate it.
Battery recycling companies like Redwood Materials are also entering the market to supply recycled materials to battery manufacturers. As they scale up, they should be able to supply raw materials cheaper than mining.
Yes, once we see recycling at scale, that’s going to be great. But I don’t know how soon they’ll be cheaper than mining. The use of recycled lithium could be a selling point, though, so they probably don’t need to beat mining, just be within the same ballpark.
Yeah faith in recycling within the US is foolish, sad but true. There are many places in the world better at it.
We’ve made it a profit game instead of something we should invest in as a society to make our lives and planet better. Very unfortunate.
Lead car batteries have a pretty good recycling rate, and not because it’s more economical than mining.
Admittedly, I am not entirely up on lithium recycling, but I think that paper recycling isn’t the best comparison. Paper (and the wood that is used to make new paper) is cheap. There are things more and less likely to be recycled, and I think the difficulty in extracting and refining lithium would make successful lithium recycling much more attractive, not to mention the fact that EVs are still popular among a crowd that might spend a little more for recycled materials.
Aluminum, which is not a fair comparison due to ease of recycling, is recycled in the US at a rate of about 65%, and closer to 75% worldwide (Brazil apparently recycles over 98%). I don’t think lithium can get anywhere near there unless someone finds an efficient way to recycle batteries made from both new and previously recycled lithium, but I do think the relatively high cost of extraction and refining could make recycling a reasonable choice. Maybe not 65-75%, but at least enough to make an impact.
That said, if it’s really inefficient and/or expensive to recycle, that is another story. Can’t be driving costs up too high. And the useful life of EV batteries that end up converted to home power banks and the like would suggest that it may be some time before we have enough scrapped batteries to even start scaling recycling up enough to impact supply chains.
But I’m still hoping for carbon batteries, so I’m not exactly sure how realistic any of my battery hopes are.
Is there any hard data on recycling?
My impression is everyone has been +spruiking it for years but batteries actually available for recycling are pretty much non existent.
Used packs from cars for example are snapped up by the restomod or homebuilt powerwall types
There’s not much data because it hasn’t been scaled up to profitable industrial levels. It hasn’t been scaled up because the raw material just isn’t there. There aren’t a ton of worn-out electric car batteries yet, and there’s enough secondary market uses that even most of those aren’t available for recycling. Which is probably a good thing.
I suspect even Redwood Materials is a bit premature in trying to scale up. Hopefully it goes well for them, but we’re probably still 3-6 years from seeing a lot of worn-out battery packs.
sort of the definition of monopolistic behavior….
they have also been padding their profits for years with sweet sweet chinese government subsidies driving the global market price of lithium below the cost of extracting and refining it, eliminating global competition and ensuring chinese market control.