The price parity of electric and combustion cars is moving away

For the past several years, the auto industry has hoped that electric cars would catch up in price to their combustion equivalents once the price of the packaged battery reached the threshold of $100 per kWh. This milestone was close to being reached until recent events. The pandemic and supply chain disruption have caused commodity prices have skyrocketed since then. The increase in the prices of nickel, cobalt, nickel and other metals crucial for the production of batteries in electric vehicles makes it impossible to reduce the prices of electric vehicles.

The world’s largest battery maker, CATL, has announced that it has renegotiated prices with its customers to address supply chain pressure. CATL is, for example, the main provider of Tesla batteries, which means that the prices of its electric vehicles will probably continue to rise, which is a serious blow to reach price parity with combustion vehicles.

Tesla has already recognized this increase in material prices and has taken it into account. The manufacturer has already increased prices several times in the last few months. The More affordable Model 3 now costs 51,990 euros in Spain (for the rear-wheel drive version) which is a significant departure from the $35,000 advertised by Elon Musk for the base version.

The forecast is that prices will continue to rise in the coming months with a fairly rapid trend. CATL itself has announced an increase in the prices of its batteries during the presentation of its economic results for the first quarter of 2022. CATL has renegotiated prices with its customers based on the foreseeable increases in its costs for raw materials. The Chinese manufacturer can no longer absorb these supply chain surges in its production lines, and has started transferring some of them to its clients.

Precisely, the economic results of CATL are a sample of what is happening in the battery industry. CATL’s operating costs grew by 199% year-on-year due to increased production and higher material prices. Despite a significant increase in turnover, profits have plummeted relative to what happened a year ago.

In the year-on-year calculation, its revenue grew by 154% compared to the first quarter of 2021 and 15% less than the fourth quarter of last year. However, net profit was 24% less than the previous year and 82% less than last quarter. The rise in the prices of materials is the main cause of this imbalance in its economic results.

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