Profits of new-energy vehicle companies dented by commodity price rises

The power battery industry sparked up in the second quarter with a jump in prices, while profits of new-energy vehicle firms were still at a low ebb.

Both new-energy vehicle firms and power battery manufacturers have responded to the surge in lithium carbonate prices with price increases in the first half of 2022.

Subject to the soaring prices of raw materials, especially lithium carbonate, Chinese leading power battery manufacturers, such as Contemporary Amperex Technology (CATL), EVE Energy and Gotion High-tech, saw their gross margins falling to new all-time lows in the first quarter.

In the face of pressure at the upstream end, battery companies started to lift product prices. CATL, as an example, in early-May confirmed its plan to increase prices gradually in the second quarter.

As a result of the price increase, the company saw its gross margin rebounding to 18.68 percent for the first half year compared with 14.48 percent in the January-March, while that of EVE Energy up from 13.75 percent to 14.96 percent and Gotion High-tech down from 14.49 percent to 14.42 percent.

Meanwhile, NEV makers also responded by raising car prices to protect the profits. According to Cui Dongshu, secretary-general of the China Passenger Car Association, prices of a total of 189 models rose between January and August this year, compared with 14 models in the whole of last year.

Most NEV companies, however, failed to withstand the enormous pressure of upstream price increases. Although they had passed on some of the added prices to the consumer side, their gross margins remained depressed.

In the first half of this year, China's auto industry saw overall profits tumble by 25.5 percent year on year, while revenues fell by only 4 percent in the same period.

This was very unhealthy, said Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers.

Electric vehicle manufacturers XPeng Motors, Li Auto and BYD all reported lower gross margins in the first half year than in the first quarter.