RPT-BREAKINGVIEWS-Battery sticker shock sharpens BYD’s edge

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Katrina Hamlin

HONG KONG, Jan 22 (Reuters Breakingviews) - BYD 002594.SZ can benefit from battery sticker shock. In China, material costs are rising, energy storage is booming and Beijing is battling both car and cell makers' excessive competition. As these combined forces push up the price of electric cars’ most expensive component, they'll lend an advantage to the $120 billion group, which was founded as a battery specialist.

Global prices of lithium bottomed out in mid-2025 at less than $10,000 per metric ton, way below the peak of $80,000 in 2022. In China, stricter mining regulations have constricted supply, greasing the rebound: battery-grade lithium carbonate prices have risen 75% to roughly $18,000 over three months, LSEG data show. Cobalt prices tripled over the past year, and nickel has surged too - though like lithium, all remain far lower than their highs three years ago or so.

Nonetheless, it'll be a shock to any who assumed battery prices would keep heading south. If the lithium carbonate price reaches $20,000, about 65% above full-year 2025 levels, in theory popular lithium-iron phosphate cells could cost 10% more, according to analysts at Wood Mackenzie, not counting any savings from improving technology and production.

It's not just raw materials piling on the pressure. Demand for home- and utility-scale energy storage, essentially provided by giant lithium-ion batteries, spiked 85% last year, per Bernstein analysts.

And Beijing's fight against the industry's "involution" - extreme, self-destructive competition - continues apace. Last year, the focus was on trying to end automaker price wars. Now suppliers are in the spotlight. In January the Ministry of Industry and Information Technology summoned 16 companies, including Contemporary Amperex Technology 300750.SZ, to caution against overcapacity in energy storage. That should embolden cell manufacturers and their suppliers to charge more. Lithium battery specialist Deegares hiked prices 15% last month, South China Morning Post reported. Average selling prices for one kind of EV battery rose 27% over three months; others increased 3-6%, per data provider Baiinfo.

BYD’s in-house battery maker – the second-largest in the world after $231 billion CATL – isn’t immune to rising costs. But it can use its scale to negotiate and minimise price hikes. The company has also invested directly in accessing resources, having acquired mineral rights in Brazil, Reuters reported, and stakes in Chinese miners.

International automakers, which operate on the assumption cells become ever cheaper, will be watching closely. Global battery pack prices hit a record low of $108 per kilowatt hour last year, compared with around $1500 in 2010, according to BloombergNEF. But extended, exponential savings aren't a given. China shows that was underpinned not only by improving technology but also ample supplies of materials, supportive policies and other potentially fragile factors. Analysis by Benchmark Mineral Intelligence, a market research group, suggests average costs for lithium-ion chemistries could rise 4% or so by 2030.

China’s charged-up battery prices burnish BYD’s strategy - and give the world’s automakers another reason to fret.

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CONTEXT NEWS

The China spot price for battery-grade lithium carbonate, a key ingredient in electric-car batteries, rose 75% between October 14 and January 15, according to data from LSEG.

London Metal Exchange spot prices for cobalt and nickel rose 32% and 18% respectively in the same period.

China's industry ministry said on January 8 it had urged battery manufacturers to optimise industry capacity and mitigate risks of overcapacity. Top battery makers CATL, BYD, Gotion High Tech and EVE Energy were among the 16 companies present at a meeting held by the ministry a day earlier to discuss the need to regulate market competition and enhance supervision, state-run China Daily reported, citing sources.

(Editing by Antony Currie; Production by Aditya Srivastav)

((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))