Car buyers always want a deal, but cars aren’t getting any cheaper soon, with
Rivian Automotive, Tesla, and now BYD raising prices. Inflation is pushing up prices from already record levels.
The Chinese-based electric-vehicle and EV battery maker
BYD (ticker: BYD) reportedly raised vehicle prices recently. BYD didn’t immediately respond to a request for comment.
BYD is the second-most valuable EV maker on the planet. The most valuable,
Tesla (TSLA), raised vehicle prices earlier this week. EV trucking start-up
Rivian (RIVN), the fifth-most valuable company in the business, raised prices earlier in March.
All EV makers are dealing with inflation on a couple of fronts. For starters, battery material prices are rising. A basket of metals that go into lithium-ion batteries is up about 70% year to date. The figures track spot prices, which don’t affect production costs immediately, but price increases like that could add $2,000 to the cost of an EV.
Citigroup analyst Jack Shang wrote Tuesday that since September, prices for various batteries have been increased by 27% to 41% by manufacturers. He says another 15% to 40% boost would be required to maintain battery producers’ margins if he takes into consideration the year-to-date move in the cost of raw materials.
Citigroup analyst Jeff Chung noted in a Wednesday report that BYD’s all-electric models have gone up about 6% to 10% year to date, while its plug-in hybrid model prices have risen about 3% so far in 2022. He believes car buyers can absorb the extra cost and notes that gas price increases are helping to maintain the attractiveness of EVs to Chinese car buyers.
Chung rates BYD stock Buy.
The entire auto industry, meanwhile, is dealing with high prices for plastics, aluminum, and steel. Benchmark analyst Mike Ward estimated in a research report earlier this week that non-battery-related raw materials were adding roughly $500 to the cost of a car.
The 2022 inflation is adding to vehicle prices that started out at record levels. A global semiconductor shortage has constrained auto production for about a year, reducing inventory and lifting prices.
The semiconductor shortage affected prices in another way, as well. Auto makers have only been making the larger, higher-end vehicles with better margins as they allocate their limited supplies of chips.. Average prices are up because there aren’t nearly as many cheaper cars on offer.
While the inventory situation led to strong per-vehicle profits for auto makers in 2021, the effect of raw-material on earnings in 2022 is an open question. Investors are nervous.
Tesla shares, along with those of
General Motors (GM) and
Ford Motor (F), are all down more than 20% year to date. That is much worse than the respective drops of 11% and 8% in the
Dow Jones Industrial Average.
Write to Al Root at [email protected]