Currently, BYD, Xpeng, NIO, Tesla, and other new energy companies have made price-increasing announcements.
- BYD has posted notice of‘ adjustments in car types’ pricing and announced that it will increase its new energy vehicles(NEV)’ prices by about 1000-7000 RMB. This announcement will be taking effect from Feb. 1.
- XPeng increased the price for all its models priced below 300,000 RMB. This includes an increase of RMB 4,300 – 5,900 for the flagship sedan P7, RMB 4,800 – 5,400 for the P5 sedan, and RMB 4,800 – 5,400 for the G3i SUV. The design for all those cars has not changed.
- On December 31, Tesla China announced that it will be raising the price of the entry-level Model 3 by RMB 10,000, and the entry-level Model Y was raised by RMB 21,088. Before, the rear-wheel-drive version of those two car types had already increased by 4752 RMB.
Reasons for the increase in price
The main reasons include a significant increase in raw material prices and the decline of subsidies for NEV purchases.
- China’s Ministry of Finance published an announcement on Dec. 31 and said that subsidies for NEV purchases in 2022 will be slashed by 30 percent from 2021. NEV makers need to raise prices to offset the drop in subsidy.
- As for customers, the subsidy for NEV purchase will end on Dec. 31, 2022. After losing the subsidy, NEV lost its advantage in prices compared to welcomed traditional fuel vehicles.
- This directly influences customers’ incentive to buy cars, and thus decreases possible sales.
By 2021, raw materials such as nickel, lithium, and cobalt are becoming more expensive than ever.
- On Jan. 22, nickel was charged at a price of 180,780 RMB per ton in Shanghai, reaching the highest price ever since Aug. 2011.
- The cost of those raw materials takes over 90% in anode production, which matters the most in automotive batteries’ manufacturing. The cost of automotive batteries takes about 30% to 40$ of the cost of production of NEV. Therefore, the increase in the price of metal raw materials causes an increase in the cost of production of NEV.
How to find a way out?
Many car companies use a time-limited price-withholding policy to encourage customers to make purchase meets now.
NIO and Xpeng announced that customers buying their cars before a certain date will still enjoy the original lower price. The price difference is paid by the car company.
- NIO announced that consumers who pay a deposit before Dec. 31, 2021, will still enjoy the subsidy and the cost will be afforded by NIO.
- Customers who paid Xpeng’s down payment before Jan. 10, 2022, could enjoy 2021’s subsidy with Xpeng affording the price difference.
Therefore, the sales will even increase in a short period for the NEV market.
However, as time goes by, the level of acceptance of the public towards NEV cars should be the deciding factor of NEV sales.
This is also the key factor of NEV market development after all those subsidies are cut off.
However, the price increase will not interfere much with the total sales because:
- Firstly, there is now a high level of acceptance for NEV cars. The level of penetration has increased from 5.4% in 2020 to 15.7% in 2022. The market share of NEV in all cars increased to 13．4％.
- Secondly, the service system for the NEV market is now completed, diminishing customers’ concerns. There are more charging stations, lower cost of batteries, and shorter time of charging.
- Thirdly, despite there being fewer subsidies, the government still launched other policies to encourage NEV consumption. THose policies such as encouraging the establishment of charging stations, other infrastructures will be beneficial to the NEV market.
