Last week, CATL, the world’s largest battery maker, did something totally unexpected. It offered several customers an opportunity to lock in battery supplies at sharply lower prices if they agreed to make CATL their supplier for at least 80% of the batteries they buy to power their electric cars. The discount offer included a provision that rocked the industry. CATL agreed to lock in new prices based on an assumption that the price of lithium carbonate would be half what it is today in the foreseeable future.
The price of lithium carbonate, one of the essential ingredients in a lithium-ion battery, rocketed to as much as $86,000 a ton last year, causing the cost of batteries for electric cars to climb by as much as 24% last year after 9 years of steadily declining prices. Spot prices were at $70,000 a ton recently according to Barron’s, but the deal CATL has offered to NIO and Zeekr is based on an expected price for lithium carbonate of $30,000 a ton by the end of this year.
“It’s very much a market share game,” Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, tells Reuters. “This is, I think, in part, a price war.” The payoff for CATL is it gets to preserve its market share in a market that is decelerating in some key areas. China’s generous incentives for what it calls “new energy vehicles” expired at the end of last year. Since then, sales of electric cars in China are down almost 7% as customers may have gorged themselves on less expensive cars in the second half of 2022 in anticipation of the higher prices that would come into effect once the subsidies ended.
The result is that suddenly there is an oversupply of battery materials, whereas previously demand far exceeded supply. Anyone who ever made it past Week One in B School can tell you that prices rise when demand is high and decrease when supply is greater than demand.
“There’s a price war going on. We’ve seen it some weeks ago at the vehicle level. We’re now seeing it at the battery level,” Eric Norris, president of Energy Storage at Albemarle Corp (ALB.N), the world’s largest producer of lithium for EVs, told Reuters. He saidCATL was looking to take advantage of its ability to scale production “to cut prices to gain share.”
CATL Responds To NIO
That is certainly part of it, but Barron’s suggests it was NIO’s decision to build its own 40 GWh battery factory in China that forced CATL’s hand. It says if car companies own their own battery manufacturing facilities, that can mean less business down the road for battery companies like CATL and that potential loss of business may have been what spurred CATL to act. Sources tell Reuters the CATL proposal requires NIO and Zeekr to purchase up to 80% of their batteries from CATL in order to get the discount, although the negotiations are ongoing and no final agreement has been reached, those sources say.
“The reductions that CATL is offering would help the Chinese EV industry,” James Frith, a principal at battery-tech focused venture capital group Volta Energy Technologies, tells Reuters. “From the Chinese viewpoint, with China having the dominant electric vehicle market, they don’t want to lose that momentum.” He added, “If some of those EVs with discounted batteries end up in Europe, it could cause trade tensions.”
CATL & Supply Side Economics
Not so long ago, there was great concern among the world’s automakers that the explosive growth of EVs would far exceed the ability of suppliers to keep up with demand. Again, as any first year B School student can tell you, increase in demand usually lead to increases in supply. “Supply is coming on stream faster than you can say ‘boo’,” analyst Dylan Kelly of Ord Minnett in Sydney tells Yahoo! Finance.“Demand remains strong but prices have been unsustainable for some time now.”
In a February 23 research note, Goldman Sachs said that because of growing supplies of lithium carbonate, its price is expected to fall to $34,000 a ton in the next 12 months from an average of $53,304 this year. By 2025 it expects lithium supply to grow on average by 34% a year against an annual demand growth rate of 25%. “The likely supply surge and downstream overcapacity are set to bring lithium prices down subsequently in the medium term,” it told investors.
Sales of battery and PHEV cars in China were off 6.3% in January after growing by 90% in 2022. That has sparked concerns about softening growth that would crimp demand for batteries and battery materials. “While we remain positive on the long-term outlook for lithium, the short-term outlook is less clear, with a clear acceleration in China EV sales needed to allay market fears,” Barrenjoey analysts said in a research note on February 17.
Christian Barbier, head of sales and marketing for Allkem, was sanguine about the fall in lithium prices, which he told Reuters “needed to happen” and was “helpful.” His assessment is that the drop in prices has been exacerbated by battery manufacturers in China jostling for market share. He added that miners were still showing strong profitability, “So that’s why we’re not too concerned about the overall fundamentals and the future direction of prices.”
A Sea Change For The Battery Industry
We were kicking this around in the executive dining room on the 14th floor of CleanTechnica’s world headquarters the other day and decided there are many factors at work here. Probably more than anything else, we are witnessing the maturing of the electric car industry. And we can’t overlook the impact of government subsidies and incentives. China has elected to end direct subsidies and the market reacted by slowing considerably. That slowdown induced Tesla to lower its prices by up to 20% in January, a move that knocked the stuffing out of used EV prices.
It’s just not possible to look at just one factor and say, “Oh, that explains everything we are seeing.” The question now is, can manufacturers produce the electric cars the world needs and do it profitably without support from local and national governments? As much as subsidies and incentives are important, they distort markets in ways that are not always understood or predictable. America may suffer an incentives hangover 9.5 years from now when the sweeteners from Uncle Sugar in the Inflation Reduction Act expire.
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FAQs
Who buys batteries from CATL? ›
BMW announced in 2018 that it would buy €4 billion worth of batteries from CATL for use in the electric Mini and iNext vehicles. In July 2022, Ford announced buying batteries from CATL for use in the Ford Mustang Mach-E and Ford F-150 Lightning models.
Is there enough lithium to make all cars electric? ›While the world does have enough lithium to power the electric vehicle revolution, it's less a question of quantity, and more a question of accessibility. Earth has approximately 88 million tonnes of lithium, but only one-quarter is economically viable to mine as reserves.
Do we have enough lithium to power the future? ›Running Out of Lithium
Global lithium reserves are estimated at over 14 million tons, and (depending on who you ask) the amount of lithium needed to meet current goals is somewhere between 0.5 and 1.3 million tons. In 2021 lithium extraction peaked at an industry record of 100,000 metric tons.
We also found the best cheap electric car and other honorable mentions. Each of these batteries contains an element called lithium. A smartphone battery holds a couple of grams of lithium, but an electric vehicle (EV) battery uses around 10kg of the element.
Who is the worlds largest EV battery maker? ›Contemporary Amperex Technology (CATL), based in east China's Fujian province, retained its position as the world's largest EV battery producer, according to Seoul-based SNE Research.
Who is the largest battery manufacturer in the world? ›- Farasis Energy (Gan Zhou) Co., Ltd. Market share as of July 2022: NA (1% in 2021) ...
- Envision AESC. Market share as of July 2022: NA (2% in 2021) ...
- Svolt Energy Technology Co., Ltd. ...
- Sunwoda Electric Vehicle Battery. ...
- Gotion High-tech Co., Ltd. ...
- CALB Group Co., Ltd. ...
- Samsung SDI Co., Ltd.
Lithium mining does have an environmental impact, but it is no worse than oil drilling. This is especially true when you consider the carbon emissions produced from petroleum products during their usage, as compared to lithium-ion batteries that have little to no GHG emissions during their use.
How many years of lithium is left? ›What are the long-term prospects for lithium demand? The raw material remains important in the long term – says, for example, Nobel Prize winner M. Stanley Wittingham, who once laid the scientific foundations for the batteries used today. “It will be lithium for the next 10 to 20 years,” says Wittingham.
What is the number one use of lithium in the world? ›Batteries account for the largest share of lithium end-usage. Propelled by the growth in the electric vehicle market, powered by rechargeable lithium batteries, global lithium demand is forecast to reach one million metric tons by 2025, and surpass two million tons by 2030.
Where are the largest reserves of lithium? ›- Chile. Lithium reserves: 9,300,000 MT. ...
- Australia. Lithium reserves: 3,800,000 MT. ...
- Argentina. Lithium reserves: 2,700,000 MT. ...
- China. Lithium reserves: 2,000,000 MT.
How much lithium is in the United States? ›
| Country | 2023 Population |
|---|---|
| United States | 339,996,563 |
| Indonesia | 277,534,122 |
| Pakistan | 240,485,658 |
| Nigeria | 223,804,632 |
According to a report by Friends of the Earth (FoE), lithium extraction inevitably harms the soil and causes air contamination. As demand rises, the mining impacts are “increasingly affecting communities where this harmful extraction takes place, jeopardising their access to water,” says the report.
How much lithium is left on earth? ›As of 2021, it was estimated that the world had 88 million tonnes of lithium resources. One-quarter of that – 22 million tonnes – is feasibly extractable.
Can lithium batteries be discharged 100 %? ›These batteries can often be discharged up to 70%. This means that in practice 30% cannot be used. Lithium batteries can be fully discharged which means you have the full capacity available to use.
Which is the No 1 battery company in world? ›Who is the largest battery producer in the world? Lento Industries Pvt. ltd is the best battery manufacturer in world (2023).
What EV company is backed by Bill Gates? ›Form Energy Inc., an energy-storage company backed by Bill Gates's Breakthrough Energy Ventures, is planning a $760 million factory in West Virginia, the latest plant announced in the aftermath of President Joe Biden's landmark climate law.
Who owns the most EV charging stations in the US? ›According to the U.S. Department of Energy, Tesla has over 1,600 Supercharger stations in the U.S., with over 17,000 fast-charging ports.
What company makes the so called Forever battery? ›In 2010, alongside a few tech execs and with backing from some of the most prestigious venture capital firms in the world, they started a company called QuantumScape (QS). Twelve years later, that company has solved the solid-state battery problem.
Which country has best battery technology? ›Share of the lithium-ion battery production capacity worldwide by country 2021&2025. China dominated the world's lithium-ion manufacturing market in 2021.
What is the most promising battery technology? ›- New-Generation Lithium-Ion Battery. A conventional lithium-ion battery uses lithium-ion as a key component of its electrochemistry. ...
- Lithium-Sulfur Battery. ...
- Saltwater Battery. ...
- Solid State Battery. ...
- Cobalt-Free Lithium-ion Battery.
Is fracking worse than mining for lithium? ›
Based on what is currently known, fracking is a much more dangerous process than lithium mining, but unfortunately, both seem to be essential to the world today. Many countries, companies, industries, and individuals are dependent on oil and natural gas.
Where is lithium mined in the United States? ›Lithium production moved overseas beginning in the 1970s, and now there is only one active mine left in the country, in Clayton Valley near Silver Peak, Nevada.
Are lithium mines destroying Earth? ›The demand for lithium for EV batteries is driving a mining boom in an arid Andes region of Argentina, Chile, and Bolivia, home to half the world's reserves. Hydrologists are warning the mines could drain vital ecosystems and deprive Indigenous communities of precious water.
What is the forever battery? ›In battery technology parlance, solid-state batteries (SSBs) are sometimes called “forever batteries.” That's because these batteries promise to far outlast traditionally technologies that rely on the electrochemical discharge of ionic solutions.
What is a better battery then lithium? ›Sodium-ion batteries have great promise. They're energy dense, nonflammable, and operate well in colder temperatures, and sodium is cheap and abundant. Plus, sodium-based batteries will be more environmentally friendly and even less expensive than lithium-ion batteries are becoming now.
What is the next battery technology after lithium? ›Sodium-ion batteries also swerve sharply from lithium-ion chemistries common today. These batteries have a design similar to that of lithium-ion batteries, including a liquid electrolyte, but instead of relying on lithium, they use sodium as the main chemical ingredient.
Which country is rich in lithium? ›Global figures, as per the US Geological Survey data, show that Bolivia has the highest 21 million tonnes of identified Lithium resources followed by 20 million tonnes in Argentina, 12 million tonnes in the US, 11 million tonnes in Chile, 7.9 million tonnes in Australia, 6.8 million tonnes in China, 5.9 million tonnes ...
Does Mexico have lithium? ›Only one lithium mine in Mexico, operated by a Chinese company in the northern state of Sonora, is anywhere close to starting production. That operation, Bacanora Lithium, appears to be Mexico's only viable private lithium mine and had been expected to start production in 2023.
Is lithium a rare earth metal? ›A lot of these warnings have been incorrectly categorized under “EVs and rare earth metals.” Though neither lithium nor cobalt are rare earth metals, and rare earth metals aren't nearly as rare as precious metals like gold, platinum, and palladium, there are important issues surrounding the production of lithium-ion ...
Who owns the largest lithium mine in America? ›What company sells the most lithium? ›
Albemarle Corp.
Albemarle is the biggest company on the list and the world's largest lithium producer.
China – 14,000 MT
China's the largest consumer of lithium because of its booming electronics and electric vehicle industries. Close to two-thirds of the globes lithium-ion batteries are made in China and it controls most of the world's lithium-processing plants.
On February 9, India's Ministry of Mines announced that the Geological Survey of India, which also assesses India's mineral resources, located 5.9 million tonnes of lithium resources – a first in the country – in the Salal-Haimana area of Jammu and Kashmir's Reasi district.
Does the U.S. have a lot of lithium? ›The U.S. produces less than 2% of the world's supply of lithium, although it has about 4% of the reserves. The largest reserves in the world are in Chile.
Is Ukraine rich in lithium? ›According to preliminary estimates, researchers believe that Ukraine is a treasure trove of lithium, holding about 500,000 tons of the “non-renewable mineral that makes renewable energy possible.” Lithium has become virtually irreplaceable in electric vehicle (EV) batteries because of its efficient energy storage per ...
Is the U.S. running out of lithium? ›The Lithium Supply Challenge
Even though the price of lithium has surged more than tenfold over the past two years, there's enough capacity to meet anticipated demand until around 2025—and potentially through 2030 if enough recycling operations come online. After that, chronic shortages are expected.
The U.S.' only existing lithium producer is in Nevada, and the country holds an estimated 3.6% of global lithium reserves, according to the U.S. Geological Survey.
Who are CATL customers? ›CATL, whose clients include Tesla Inc (TSLA. O) and Volkswagen AG (VOWG_p.DE), is the world's largest battery maker.
Does Tesla buy batteries from CATL? ›CATL, the world's largest electric vehicle battery maker, is a supplier to companies such as Tesla and Ford.
Does Tesla use CATL batteries? ›CATL will supply so-called 'M3P' batteries to Tesla for the first time for the Model Y with a 72 kWh battery from the fourth quarter of 2022. The cathode is no longer made of lithium iron phosphate, but of lithium manganese iron phosphate (LMFP).
Can I buy shares of CATL? ›
Purchase through Interactive Brokers: Interactive Brokers is one of the few U.S. brokerages that allow American investors to buy Chinese class A shares. Buy a battery-themed ETF that owns CATL: There are several ETFs that target the electric battery market and own shares in CATL.
Who is Tesla's main lithium supplier? ›Tesla buys lithium for its batteries directly from mines. In spring 2022, the company reportedly signed two significant contracts with Australian mining operators; specifically, the lithium-spodumene concentrate comes from Core and Liontown Resources. In addition, Tesla purchases lithium hydroxide from Ganfeng.
Who is the largest manufacturer of lithium batteries? ›CATL (Contemporary Amperex Technology Co. Limited) has become the largest lithium-ion battery manufacturer in 2022, overtaking its main competitor LG Energy Solution. CATL has already announced plans to ramp up its lithium-ion battery production to 100 gigawatt hours or more.
Who is the largest consumer of lithium? ›China's the largest consumer of lithium because of its booming electronics and electric vehicle industries. Close to two-thirds of the globes lithium-ion batteries are made in China and it controls most of the world's lithium-processing plants.
Does CATL supply to NIO? ›Apart from Tesla, China-headquartered CATL also supplies batteries to other EV makers such as Nio Inc.
Who is Tesla's biggest battery supplier? ›Panasonic is the sole maker of the more advanced Tesla battery, ensuring it remains a key supplier to the U.S. company, at least for its pricier models, even as the EV maker seeks out battery suppliers in China and elsewhere.
Where does CATL source lithium? ›A giant Chinese battery company, Catl, has won a bidding process to develop Bolivia's huge lithium reserves. The ultra-light metal is used in electric vehicle (EV) batteries, production of which is expected to soar as fossil fuels are phased out.
Who supplies lithium CATL? ›Tesla China's battery supplier Contemporary Amperex Technology (CATL) won a bid for exploration rights to a lithium clay project located in Yichun through its subsidiary Yichun Contemporary Amperex Resources Limited.
Does CATL make solid state batteries? ›China's leading battery manufacturers, CATL 宁德时代 and CALB 中创新航, have announced production lines for solid state batteries, which are expected to be on the market by 2030.
Does NIO use CATL battery cells? ›CATL, short for Contemporary Amperex Technology Co Ltd, is currently Nio's sole supplier of batteries for cars and battery swapping stations.
Who are the major stock holders in CATL? ›
| Rank | Holder Name | Shares Change |
|---|---|---|
| (000 Shrs) | ||
| 1 | Ningbo meishan bonded port ruiting investment co. ltd | 569,481 |
| 2 | Huang (Shilin) | 259,212 |
| 3 | Hong kong central clearing company limited | 179,145 |
China's battery manufacturing giant, Contemporary Amperex Technology Ltd. (CATL), said in June it is “ready to produce” a battery that will last 16 years and 1.2 million miles but hasn't said much more about it.
Who is CATL competitor? ›CATL's competitors and similar companies include Shenzhen Senior Technology Material, Shanghai Electric, LONGi Group and BYD.