Booming EV demand sent lithium prices to surge
Tesla delivered 936,172 electric vehicles in 2021, a 90% astounding increase. The figure not only underlines the blowout growth of the EV sector but suggests a supply-demand competition and production capacity crisis in the lithium-ion battery industry.
Lithium-ion battery and relevant industrial chains saw ceaseless price hikes last year, which has shown no sign of slowing by far. Prices for some raw materials and cells even doubling or tripling. LFP cell fleets, for example, saw bid prices sitting at RMB 0.5/Wh in auctions held in early 2021, but RMB 1/Wh by the year’s end, a 100% increase.
Indeed, prices for many products rose against the tide under impacts from the pandemic. But the skyrocketing prices of lithium-ion battery can be more attributed to an imbalanced supply-demand relationship. It is no news that car companies and cell makers work together, co-funding the construction of factories. Lately, Tier-2 cell makers, either from the EV or energy storage industry, purportedly failed to acquire raw materials, cells, and other related products, and had to wait for more than one year of lead time. They pay deposit, providing financial supports for the expansion of cell makers, in order to ensure precedence of buying in the future. Various measures of securing cells or cell makers are taking its course.
Lithium-ion battery shortage could impede industry developments
It is worth noting whether long-term, imbalanced supply-demand relationship will affect the development of relevant industries. Not only EV makers, but also the energy storage sector needs to fight for cells; if short supply pervades, one of them, or even both, will see development decelerate. Subsequently, rising costs caused by continual price hikes will pass onto consumers, putting a question mark over the previously forecast declining cell costs and cheaper EVs, hitting hard on the development of the industry. This phenomenon could be seen last year from Tesla’s EV sales and some best-selling EVs. Among Tesla’s 940,000 sales, the masstige Model3/Y accounted for 910,000. Therefore, many companies have been worried about the supply-demand relationship of the lithium-ion battery supply chain.
Impressive production capacity plans of Tier-1 and 2 makers
All companies, even governments, are working toward to easing cell supply. In recent years, China monopolizes global lithium supply, forcing Europe and the U.S. to take actions. Europe, for instance, has more than 500 GWh of construction plans for cell production capacity, whilst LG, Samsung, and SKI setting up plants in the U.S. China has even more lavish production expansions. CATL planned to bring its capacity to nearly 500 GWh by 2023.
In the meantime, rising Tier-2 cell makers, sSVOLT and CALB, each set goal to achieve 600 GWh and 500 GWh of production capacity by 2025, challenging the leading position of CATL. Still, regardless of inter-company competitions and active expansions in different countries (regions), China will continue dominating its place as the top global lithium-ion battery supplier of the world.
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