New cars may finally stop getting more expensive and, in theory, prices could even drop, thanks to a drop in the prices of raw materials for their production. This can already be seen with some brands, such as Tesla. However, other pressures still remain, such as employee demands for higher wages.
Compared to the recent, pre-coronavirus past, the prices of new cars today are at sometimes unbelievable levels. There are a number of reasons, such as problems in supply chains – the shortcomings of semiconductors are well known, but at the moment they are almost completely behind us – or rising prices of raw materials. Now, according to the British website Autocar, this trend is reversing – materials are getting cheaper.
Cars as a whole could soon follow, many top executives in the auto industry think. “Unfavorable conditions for raw materials have disappeared. We are entering a period where costs should gradually decrease,” cites the website of Thierry Piéton, Renault’s CFO.
According to other car companies, the immediate future in terms of prices is calmer after the shocks caused by covid and subsequently the war in Ukraine. Some other inflationary pressures remain, however the price of raw materials is on the decline.
In some cases, this is already reflected in the prices of new cars. The fundamental price reduction of Tesla cars has been a reality for several months. “Lithium prices have been absolutely insane for a while,” Tesla boss Elon Musk let himself be heard during a conference call on the topic of economic results. The price of lithium carbonate, which is bought by battery makers, has halved on a key trading platform, the Shanghai Metal Exchange, since last November.
We can also see a certain reduction in prices at Renault. The modernized clio in the E-Tech version is a significant 900 pounds (25 thousand crowns) cheaper in Great Britain, and it could be similar in the arcana facelift, at least according to Lucy de Mea, the head of the brand. “When there’s an opportunity to lower prices while improving margins, we’ll do it,” de Meo said.
Of course, it will take some time for resource price reductions to be reflected in the final price of cars – if at all – as automakers negotiate prices with suppliers in advance. “We typically see changes coming about a quarter of a year before they are reflected in our financial results,” said outgoing Tesla CFO Zachary Kirkhorn. He also mentioned falling steel and aluminum prices: “It’s not as significant as the impact of lithium, but it is significant.”
Another reason for only a gradual, if any, decline in car prices is the fact that companies often “insure” themselves so that their viability is not threatened in a situation where prices shoot up to crazy heights. Their customers, whether they are companies or end consumers, usually do not see cost reductions anytime soon.
BMW, for example, is not involved in price reductions. “Yes, the drop in raw material prices is beneficial, but we are still paying more in the supply chain than last year,” said Walter Mertl, BMW’s new chief financial officer. Stellantis’ new chief financial officer, Natalie Knight, commented similarly: “Commodity prices have been high so far due to the long-term effects of price increases in the first half of 2022.”
But she also reminded of other inflationary pressures, because the price of materials is not the only thing that makes up the price of a car. One of them is the demands of employees for higher wages. Ford, on the other hand, mentions higher prices for warranty and post-warranty repairs on the part of car dealers to end customers.
And finally, the reduction in the prices of raw materials for car companies may not “flow” at all. They are at the end of subcontracting chains. That’s also been part of the seriousness of semiconductor problems – semiconductor manufacturers have prioritized the fast-growing consumer electronics industry – and is why some automakers are trying to get more of those chains under their wing. This is how Mercedes-Benz secures enough chips and is exploring the possibilities of how to do this with materials for the production of batteries for electric cars.
In the near future, however, lithium prices will be the most important. In a world of increasing demand for electric cars, the demand for lithium will also grow accordingly, and it is lithium prices that determine the prices of electric car batteries. “In order for us to build affordable electric cars and for prices to stabilize, battery prices must come down. There is no other way,” says Fiske’s chief financial officer Geeta Guptová-Fiskerová.
Lithium reserves are sufficient in the world, but mining is slow, and it takes years to start up a new mining plant in particular. “Tesla can build a gigafactory in two years, a cathode factory can be built even faster, but it can take 10 years to build a greenfield project to mine and process lithium from liquid.” Joe Lowry, founder of the consulting firm Global Lithium, made himself heard last year.
Lithium is mined in two ways. First, by pumping a liquid containing lithium and then evaporating the water, which creates a slurry from which the metal is subsequently obtained. Extensive shallow reservoirs are needed for water evaporation. And on the one hand, by mining the mineral spodumene, from which a powder containing lithium is obtained by roasting and washing with sulfuric acid.
2023-08-15 15:58:00
#trends #world #cars #reduction #raw #material #prices #impact #electric #cars
