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China Hikes Raw Material Prices and the EV Makers are Forced to Increase Their Car Prices

China Hikes Raw Material Prices and the EV makers are forced to increase their car prices

The cost of raw materials in China shot up, and many electric vehicle companies had to increase their car prices.

Analysts have said that certain companies like Tesla and BYD (backed by Warren Buffett) will be able to thrive and manage everything better because they have worked on building solid and secure supply chains in the past. The smaller players, low-cost companies, will likely face defeat and might have to cut some lined-up models.

Xpeng, a Chinese startup of electric cars, has raised its price range between 10,000 Chinese yuan ($1,587) and 20,000 Chinese yuan.
Tesla has hiked its prices several times in the past two weeks. BYD and WM are not lagging and have also raised prices.

Prices have also been increased by the joint venture between state-owned automaker SAIC and GM, SAIC-GM Wuling. Wuling is the second-largest new energy player in China. It is famous for producing lower-cost vehicles.

The surging costs of raw materials have made the functioning of companies harder as the components that go into the batteries have also become expensive. The shortage of semiconductors is a global crisis in the auto market.

According to Benchmark Mineral Intelligence, the lithium price is up more than 400% year-on-year. The prices of Nickel (another significant element of the battery) have also risen and are volatile.

Demand for Electric Vehicles has not seen a downfall and is strong.
According to the China Passenger car association, the sales of electric vehicles in China in the first two months were up 153.2% year-on-year.

In the coming times, analysts are not foreseeing any hit to the demand for Electric Vehicles.

Canalys, a tech firm’s principal analyst, Jason Low, believes that there will be a limited impact on the demand for EVs. The people who wish to buy and have strong desires will purchase new energy vehicles and will likely swallow the higher price or opt for a different model/brand to accommodate their budget.

Mid-level/entry-level companies operating at the lower end, weak brands, will be nervous about passing that extra cost to their customers even if the demand is strong enough.

According to Low and Russo (CEO at Shanghai-based automobility limited), two of the best-positioned players in the game right now are Yela and BYD. The main reason is their strong supply chains for batteries and components, and BYD makes its batteries. Tesla has a strong market in Shanghai, with CATL being its best battery supplier.

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