- Due to the significant rise in prices of upstream core raw materials and automotive storage chips, more than 15 new energy vehicle manufacturers, including BYD, Tesla, and Xiaomi Group, have recently collectively increased the prices of some models or tightened car purchase credit policies. The price adjustments per vehicle mostly range from 3,000 to 20,000 RMB.
- The spot price of battery-grade lithium carbonate has returned above 200,000 RMB per ton. Coupled with global generative AI capital expenditures squeezing semiconductor capacity, leading to a more than 180% increase in high-end automotive storage chip prices, UBS estimates show that the hardware cost per medium-sized intelligent electric vehicle has increased by 4,000 to 7,000 RMB this year.
- Regarding this round of price adjustments, Cui Dongshu, Secretary-General of the China Passenger Car Association, stated that given the domestic auto industry's sales profit margin fell to a historical low of 3.2% in the first quarter, car companies have limited room to absorb cost fluctuations. However, due to weak demand and intense stock competition, the probability of a universal price increase across the industry remains low.
Mismatch in Core Raw Material Cycles and Cost Transfer
The current wave of price adjustments by new energy vehicle companies directly reflects the severe pressure exerted by upstream commodity price fluctuations on the terminal manufacturing sector. As a core component accounting for 30% to 50% of the total vehicle cost, changes in the cost of power batteries directly determine the profit baseline for car companies. Data shows that the spot and futures prices of battery-grade lithium carbonate have significantly rebounded in recent months, rising more than 250% from last year's low. This cyclical recovery of energy metals has undermined the price reduction and promotion logic based on cheap lithium salts established since the second half of last year. When the burden of raw material procurement exceeds the financial buffer within car companies, transferring cost pressure to the consumer end becomes a necessary choice to maintain healthy cash flow, explaining why leading car companies have revised their pricing strategies at this point.
Supply Chain Ripples from Structural Squeeze in Storage Chips
In addition to traditional battery raw materials, the current cost increase is compounded by structural imbalances in the semiconductor supply chain. The explosive growth of global generative artificial intelligence has prompted storage chip giants to shift limited advanced packaging and wafer foundry capacity towards high-profit AI server products. This capacity shift has directly led to a structural shortage of automotive-grade storage chips, particularly with high-end DDR5 spot prices for advanced driver assistance systems recording an increase of over 300%. The automotive industry's reliance on computing power and storage hardware is rising exponentially, with UBS estimating that automotive chips alone have increased the cost of intelligent driving models by 3,000 to 7,000 RMB. This indicates that the automotive industry is facing direct competition with the technology industry for underlying computing resources and is currently at a disadvantage in the short term.
Testing the Profit Margin Red Line for Automakers
After years of price wars, the profitability of China's automotive industry has reached a critical point. Macroeconomic data shows that the total profit of the automotive industry in the first quarter fell by 18% year-on-year to 78.4 billion RMB, with the sales profit margin dropping to a nearly ten-year low of 3.2%. In previous industry cycles, automakers could typically absorb supply chain fluctuations internally by enhancing scale effects, optimizing production rhythms, and iterating technical architectures. However, the extreme contraction of current profit margins means that traditional cost-sharing models have failed. Tesla's price increase for the Model Y long-range and performance versions, along with tightening zero-interest policies, essentially reflects the pressure on industry profit margins. For many new brands that have not yet achieved breakeven, price increases are a passive defensive measure to prevent operational cash flow disruptions.
Dynamic Game of Market Share and Pricing Power
Despite the systemic rise in supply chain costs, automakers' pricing power shows significant differentiation in an environment where macro demand is under pressure. Cui Dongshu from the China Passenger Car Association pointed out that high-end new energy vehicle companies, with a gross profit margin of over 20% and strong brand premiums, have some ability to resist risks and pass costs downstream. However, for participants in the highly competitive mid-to-low-end market, rashly following significant price increases can easily lead to the loss of target customers. Therefore, the current market price increases are mainly exploratory strategies, such as raising the price of specific optional packages (e.g., BYD's "Eye of the God B" auxiliary driving laser version) or canceling free battery swap rights (e.g., NIO) to implement implicit price increases. If lithium carbonate and metal prices peak and fall in the second half of the year, the current exploratory price increases may quickly turn into a new round of covert discounts.
