(Yicai) July 9 -- The Chinese new energy vehicle industry is undergoing underlying changes, as battery costs now account for more than 40 percent of the total costs, according to the secretary-general of the China Passenger Car Association.

In the fossil fuel vehicle era, automakers had the key saying about supply chain costs, but battery manufacturers now run the show, having replaced original equipment manufacturers as the industry's new center of gravity, Cui Dongshu said yesterday at a media briefing. Recent fluctuations in lithium carbonate prices have put greater cost pressure on Chinese NEV makers that rely entirely on externally sourced batteries, he added.

Prices of lithium carbonate, a key raw material for NEV power batteries, 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 a 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 showed that lithium carbonate spot prices experienced great fluctuations between June 29 and July 2. The gap between this year's highest and lowest spot price for the raw material is nearly CNY50,000 (USD7,350) a ton, a swing of close to 25 percent.

Global lithium reserves are abundant, and supply is theoretically nearly unlimited, Cui noted, adding that speculation is the main reason for price fluctuations, as well as the biggest disruptor to the industry. A pullback in lithium prices is broadly positive for the industry, which should not be overly pessimistic about short-term price swings, he believes.

Rising battery material costs are reshaping how profits are distributed across the NEV supply chain. This round of lithium carbonate price hikes has driven strong earnings growth at battery makers, with cost pressure now fully passed down to downstream players, Cui said.

With retail sales of new energy passenger vehicles down nearly 20 percent in the first half, weak domestic demand making automakers reluctant to raise prices, and fluctuating battery costs, automakers' profits have kept squeezing, especially those of companies relying solely on external battery supply, Cui pointed out.

This dynamic underscores the core value of carmakers developing their own battery technology in-house to hedge against raw material cost swings, according to Cui. He called on the industry to focus on core underlying technologies, such as solid-state batteries, high-voltage platforms, advanced smart driving, and battery recycling, replacing price wars with technological differentiation, and coordinating the full supply chain to spread out research, development, and manufacturing costs.

It is worth noting that despite fluctuating raw material prices, China's battery export prices have been falling in recent years, even though the pace of decline has slowed, mainly because of the fierce international market competition and the weaker position of Chinese manufacturers compared with more established overseas peers, such as Samsung and LG Chem.

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

Editor: Futura Costaglione