As the deadline for ending subsidies by 2023 nears, carmakers are racing against time —— and each other —— to put new price tags on their products
China's budget car maker Wuling has raised the price of its NanoEV model by CNY 3,000 (USD 472), as part of its reponse to dwindling national subsidies for new energy vehicles.
SAIC-GM-Wuling, the parent company of the Liuzhou, Guangxi-based firm, said this price hike applies to different versions of the NanoEV, ranging from the base model to the top-of-the-line variant.
The adjustment will drive up the car's retail price range to between CNY 52,800 and CNY 62,800.
The increase comes after the national subsidies are poised to further shrink by roughly 30% from the level in 2021.
Starting January 1, China's four ministries implemented new standards on NEV subsidies that effectively sent prices of small-sized and compact EVs higher by CNY 3,000 to CNY 5,000, market data suggest.
Subsidy cuts have continued ever since the country rolled out the scheme to encourage sales of electric vehicles. Models carrying a sticker price below CNY 300,000 are eligible for a one-off subsidy of up to CNY 25,000.
The country will cease to subsidize NEV purchase by the end of 2023.
In advance of the deadline, car producers are scrambling to increase prices to offset rising costs. According to Galaxy Automotive Research Institute, an industry researcher, in January alone, major players have announced price increases to varying degrees.
For example, Xpeng raised the price of its flagship P7 sedan by CNY 4,300 to CNY 5,900 in January 2021, with the best-selling model now retailing for CNY 224,200 to CNY 409,900.
Meanwhile, the Guangzhou-based carmaker also announced price hikes of between CNY 4,800 and CNY 5,400 for its P5 sedan and G3i SUV.
On February 1, BYD also joined a handful of auto makers in putting new price tags on its cars. Its iconic Dynasty and Ocean series have gone up by CNY 1,000 to CNY 7,000 in asking prices.
On the same day, Feifan Auto, a sub-unit under SAIC, also said it would adjust the prices of its flagship SUV MARVEL R and also of its ER6 models.
Except for the entry-level version, the official price of the MARVEL R went up by CNY 2,000, while ER6 added CNY 1,000.
Apart from the narrowing subsidies, burgeoning demand for NEVs in China has also driven higher the price of raw materials needed to build cars.
According to the China Alliance for Innovation in the Automotive Battery Industry, the costs of lithium-ion battery cathode material — widely used in car batteries — rose 108.9% on average and those for lithium-ion phosphate cathode material shot up 182.5%.
The price of lithium in previous years was as low as CNY 30,000 per ton, and now it has skyrocketed to CNY 330,000 to CNY 340,000 per ton.
In addition to raw materials for battery packs, core parts such as motors are increasingly costlier, diminishing the profits of many carmakers.
However, despite the headwinds, the NEV sector is likely to continue its momentum into 2022. Galaxy, the car industry researcher, projected NEV sales to hit 4.77 million units this year, with a penetation rate of 21%.
Tianfeng Securities, a brokerage firm, said in a research note earlier this year that China's new energy passenger car sales are expected to top 5.5 million in 2022, up 6.1% year on year.