(Yicai) July 9 -- With batteries now accounting for over 40 percent of new energy vehicle production costs, the “center of gravity” of China’s NEV industry is tilting toward battery makers, spotlighting the vulnerability of those carmakers that rely entirely on third-party suppliers for their power packs, according to the secretary-general of the China Passenger Car Association.

Automakers held sway over supply chain costs in the era of the internal combustion engine, but now the car industry’s balance point is increasingly shifting toward battery manufacturers, Cui Dongshu said at a media briefing yesterday.

Recent sharp swings in the price of lithium carbonate -- an inorganic salt used as a key chemical precursor in the manufacturing of cathode materials for the lithium-ion batteries that power electric vehicles -- have scaled up the cost burden on those NEV makers that depend solely on externally sourced batteries, he said.

Prices of lithium carbonate surged to CNY200,000 (USD29,420) a ton in mid-May, the highest in two and a half years. They then fell to CNY151,750 per ton on June 29, after Contemporary Amperex Technology, the world's largest battery maker, received the go-ahead to resume mining operations. Soon after, they rebounded to CNY165,000 a ton as energy-storage demand picked up and battery makers increased procurement orders to expand output and hold their market share.

Data from the Shanghai Metals Market also shows that spot prices fluctuated greatly between June 29 and July 2. The gap between this year's highest and lowest spot price was nearly CNY50,000 (USD7,350) per ton, a swing of close to 25 percent.

Global lithium reserves are plentiful and supply is theoretically almost unlimited, according to Cui, who argued that speculation rather than genuine scarcity is the main driver of price volatility and the biggest source of disruption for the industry. A piece pullback is broadly positive for the industry, he said, cautioning against excessive concern over short-term swings.

Rising battery material costs are reshaping how profits are distributed across the NEV supply chain. The latest surge in lithium carbonate prices has driven strong earnings growth at battery makers, while the resulting cost burden has been largely passed downstream to automakers, Cui said.

Carmakers are facing mounting pressure on several fronts. Domestic retail sales passenger NEVs fell nearly 20 percent in the first half, limiting manufacturers’ ability to raise prices amid weak consumer demand. At the same time, volatile battery costs have continued to erode margins, with firms that rely entirely on third-party batteries bearing the greatest strain, Cui pointed out.

The dynamic underscores the strategic value of developing in-house battery technology and production capabilities as a hedge against raw material price swings, Cui said. He urged the industry to focus on foundational technologies such as solid-state batteries, high-voltage platforms, advanced smart driving systems, and battery recycling, replacing price wars with technological differentiation.

Greater coordination across the supply chain would also help spread research, development, and manufacturing costs, he added.

Despite raw material cost swings, China’s battery export prices have been falling in recent years, although the pace of the decline has moderated. This largely reflects intense competition in overseas markets and the relatively weaker pricing power of Chinese manufacturers compared with established global rivals, such as Samsung SDI and LG Energy Solution.

The average export price of lithium batteries dropped 26 percent to CNY142,900 per ton in 2024, 21 percent to CNY112,300 in 2025, and 12 percent to CNY104,800 in the first five months of this year, according to CPCA data. In May, it fell only 8 percent to CNY105,500 from a year earlier.

Editor: Futura Costaglione