Contemporary Amperex Technology Co. Ltd. (CATL), the world's largest electric vehicle battery maker, is in talks to offer automakers steeply discounted prices in exchange for sourcing the vast bulk of their power cells from the company in a bid to stave off growing competition from smaller rivals, Caixin has learned.
If the plan goes ahead, CATL will sell the strategic clients EV batteries made from self-manufactured lithium carbonate at a low price. In return, they will be required to sign a contract committing them to buy 80% of their EV batteries from CATL over the next three years, a person close to the company told Caixin on Sunday.
The names of automakers participating in the talks were not given.
The person did not disclose how low the price will be but said it will lead to a significant drop in the carmakers' battery procurement costs because it will be set based on the production cost of CATL's self-made lithium carbonate that is estimated to be up to 200,000 yuan ($29,100) a ton, far below market prices.
The move marks the latest effort by the Fujian-based company -- which counts Tesla, Nio and Li Auto as its major clients -- to further consolidate its market dominance after struggling with rising prices of raw materials used for making EV batteries amid intensifying market competition.
Some analysts say the pricing strategy might play a role in stabilizing EV prices, especially after the termination of state subsidies for new-energy vehicle purchases on Jan. 1.
On Friday, the spot price of battery-grade lithium carbonate stood at about 440,000 yuan per ton, compared with its historical high of around 600,000 yuan a ton in November, according to data from industry consultancy Mysteel.
The pricing plan designed for its strategic clients could be a result of CATL's efforts over the last two years to increase investment in lithium mining projects at home and abroad, with the latest push in January when the Bolivian government selected a Chinese consortium led by CATL to invest more than $1 billion in developing local untapped lithium deposits.
Those projects are expected to start production of lithium carbonate in the next three years in support of the implementation of the new pricing strategy, said the person close to CATL.
Discussions over the new pricing plan are still in the early stages, with many automakers responding positively while remaining cautious as CATL has asked them to make an unspecified upfront payment as it is unclear whether the price of battery-grade lithium carbonate will remain high over the next three years, Caixin has learned.
The price of battery-grade lithium carbonate may fall to between 350,000 yuan and 400,000 yuan a ton in the second half of this year, said Ouyang Minggao, a Tsinghua University professor and a member of the Chinese Academy of Sciences, at a Friday event held by the state-affiliated industry association China EV100.
Ouyang, who is also China EV100's vice president, added that a reasonable price should be around 200,000 yuan a ton.
The discount offer is a tactic by CATL to better compete with its smaller rivals, which are ramping up efforts to encroach on its turf with their growing production capacity, an EV battery industry expert told Caixin.
For example, Li Auto announced earlier this month that the basic version of its newly launched L7 SUV would be fitted with batteries produced by SVOLT Energy Technology and Sunwoda Electronic, breaking the tradition of choosing CATL as its exclusive battery supplier.
In 2022, CATL retained its position as the world's largest EV-battery maker by installed capacity, with a global market share of 37%, followed by LG Energy Solution and BYD, which controlled 13.6% and 13.6% of the market respectively, according to Seoul-based SNE Research.
In its home market last year, CATL continued to be the No. 1 EV battery maker by installed capacity with a 48.2% share, with the second and third spots going to BYD and CALB, which controlled 23.5% and 6.5% of the market, according to the China Automotive Battery Innovation Alliance.