What's wrong with me being a rich man?

Chapter 593 Persistence
Silicon Carbon Group has been making frequent moves, with its record-breaking sales of 8016 vehicles in August confirming the accuracy of its previously announced production capacity information. This sales figure of "eight" has indeed raised the bar to a new level.

More than 8,000 domestically produced new energy SUVs priced around 300,000 yuan?

Such a string of adjectives is simply dazzling and mesmerizing to anyone familiar with the domestic market!

Who exactly is buying cars from the Silicon Carbon Group?

What is it about this car that makes it so magical?

There are many social platforms on the mobile internet, and there have always been similar questions about the carbon silicon Kyushu. However, with its steady increase in sales over the past six months since its release, many questions have shifted in focus. Why is this car selling so well online, but I've never seen it offline?

The accurate answer is actually quite easy to come up with: the time frame is still short, the stock is small, and the market strategy for silicon carbon is biased. However, even if some people say that silicon carbon companies can be seen occasionally in East China, this will only be a ripple in the crowd.

The market still needs time to accept the development of new energy and silicon carbon groups, but suppliers have been adjusting prices as silicon carbon sales have increased.

Yu Xing has mentioned on different occasions that the cost of a single vehicle from Carbon Silicon Kyushu is as high as 32 yuan. The company wants to exchange volume for price, and the internal goal is to reduce the cost to at least 28 yuan in order to mitigate the impact of subsidy reduction.

In April of the first half of the year, the total sales of Carbon Silicon Kyushu exceeded 4 units. At that time, the cost per vehicle began to ease. For example, the cost of the vehicle body was reduced by 1400 yuan due to mold sharing and process optimization. The total cost of the vehicle was reduced to 31.2 yuan.

By August, Kyushu had secured a significant discount on batteries from CATL, resulting in sales exceeding 3 units. The battery price dropped from 9.4 to 8.4, and the overall vehicle cost decreased to 29.5, which is close to the final price of the Pro version.

Normally, silicon carbide companies would conduct a price reduction negotiation across the entire supply chain a year after Kyushu's launch, but the general sales milestone before the launch of a new car is 3 units as an important dividing line.

In other words, most people consider 3 to be a high target, given the price point. As Kyushu has made great strides and increased its monthly sales from 6 to 8, its bargaining power in the silicon carbide market has risen.

There are still doubts about the sales volume of silicon carbide next year due to the reduction of subsidies. Suppliers almost all believe the claims made by silicon carbide at the negotiating table. Kyushu is currently focusing on the development of the Beijing, Shanghai, Guangzhou, Shenzhen and East China markets, and there is still a lot of room for improvement in the future.

Based on this expectation, silicon carbon could achieve sales of 5 units in October. This figure represents the highest discount even from CATL, indicating that Kyushu's cost is close to 28 yuan.

With the addition of subsidies, the fact that Silicon Carbon Group was able to turn a profit in fiscal year 2015 was undoubtedly a remarkable achievement.

However... on September 13th, Yu Xing received a call from Zeng Yuqun in Ningde, who delivered bad news.

宁德与碳硅签订的是基准+浮动的采购合同，按照0-3万、3-5万、5-10万的销量区间执行阶梯价，但电池成本很大程度上是由原材料的价格来决定。

Zeng Yuqun had discussed this point with Yu Xing in person when he visited Lingang before. However, with the sales of silicon carbon rising steadily in the market and news of a rush to go public, he was afraid that it would affect the other party's plans, so he had to contact him as soon as he received the new information.

After a brief exchange of pleasantries, he went straight to the point: "Mr. Yu, CATL's battery prices may not be able to drop next month. We've done our internal estimates, and we expect them to remain around 8.4 yuan."

According to the contract, the purchase price of the battery packs from Carbon Silicon Kyushu in October should be 75,000.

Yu Xing said, "President Zeng, can't we just go left, do we have to go right too?"

Zeng Yuqun said helplessly, "FMC has already been talking to us about raising prices. They are likely to raise prices by 15% globally at the end of this month or the beginning of next month. CATL can't withstand that kind of increase."

FMC is one of the three giants in the global lithium salt market, together with Albemarle and SQM, controlling approximately 70-90% of the global lithium resource market share.

Whenever it officially announces a price increase, prices in the global market will follow suit.

Furthermore, this is not just a matter of 15%. Such price increases by giants are likely to trigger a wave of price hikes across the entire industry, with the final increase certainly far exceeding 15%.

Yu Xing asked, "Is this accurate information? No wonder the stocks we bought have risen quite a bit again. The industry has a high probability of anticipating a price increase."

Chile, a major lithium-producing region globally, experienced historically rare heavy rainfall in March, triggering massive floods that occur only once every few decades, leading to a rise in raw material prices.

Zeng Yuqun said with certainty, "It's accurate information, President Yu. There's nothing we can do about it. It's not that we want to lower prices just because Kyushu's sales are good; it's the raw materials..."

CATL has also benefited from opening up the carbon and silicon market in China in the past six months. Many new energy projects have come to conduct preliminary communication and exchanges. CATL will not seek short-term benefits in any way.

“I understand, Mr. Zeng, I understand this.” Yu Xing had expected this, but then said, “However, Mr. Zeng, you also know that we are going public. I don’t necessarily want to cut costs as much as possible. Raw material prices are rising, and battery prices are rising too. We can still reduce the price as much as possible, but it can’t exceed 8.4. Battery cell costs account for 7%, and lithium carbonate and lithium hexafluorophosphate affect 4% of the battery cell cost. This transmission is discounted.”

It's not that a 15% increase in raw material costs will automatically lead to a 15% increase in battery pack costs. The overall price increase from top to bottom is roughly 6% for the battery itself. Besides the cells, there are also costs for the BMS, thermal management, casing, and auxiliary materials. "Mr. Yu, don't worry about that. We will absorb the costs ourselves. The specific price will be negotiated with them. The 8.4 yuan figure I mentioned isn't for next month or the month after, but a likely average price for the foreseeable future," Zeng Yuqun said seriously. "Mr. Yu, this round of price increases might be quite severe. FMC's actions are just the trigger."

He went on to make a relevant assessment: "Mr. Yu, your 43 kWh battery pack is currently about 8500 yuan cheaper than ternary lithium batteries, but next year it is very likely that ternary lithium batteries will be cheaper."

Lithium iron phosphate has always had a significant advantage over ternary lithium in terms of low cost. However, with the arrival of a wave of price increases, CATL's internal analysis suggests that this will be a multi-year cycle, and the price of lithium iron phosphate will continue to rise in the future, possibly even surpassing the price of ternary lithium of the same density next year.

Lower density, but higher price.

Seeing that there was no immediate response from the other end of the phone, Zeng Yuqun continued, "With the same density, ternary lithium battery packs are even lighter. Your Kyushu can reduce the weight by at least 100 kg."

Yu Xing still did not answer.

Seeing this, Zeng Yuqun said again, "It's not just about weight and battery cost, Mr. Yu, the unit cost of lithium iron phosphate battery packs and thermal management systems is also higher."

The reason is that the energy density is low, so the unit cost per unit is high.

“President Zeng, I understand what you mean,” Yu Xing said slowly. “It’s not that we haven’t considered ternary lithium batteries, or that we haven’t done any research. Take this weight, for example. While ternary lithium batteries can reduce the weight of the battery itself, the added weight in the casing and thermal management to improve its safety comes back.”

Upon hearing this, Zeng Yuqun brought up some new information from the side: "President Yu, we have made greater progress in the research and development of ternary lithium. Its future energy density will be higher. Silicon carbon is always going to be used in pure electric vehicles. Moreover, if other manufacturers use ternary lithium with higher density to extend the range or seize the pure electric market, it will be very dangerous for silicon carbon."

"We will put our second-generation ternary lithium battery into production by the end of the year. The energy density can reach 200+ Wh/kg. This improvement is much easier than that of lithium iron phosphate."

“Mr. Yu, you are the founder of silicon carbon, and I am just a battery supplier. Logically speaking, it is not appropriate for me to say this, but I have to say that you need to carefully consider this matter.”

Yu Xing pondered for a moment, then said from the same angle, "President Zeng, as of last month, we sold 40771 carbon silicon vehicles. We can sell 50,000 vehicles by the first week of October at the latest. There are still two months left, and we hope to reach 70,000 to 80,000 vehicles this year. I am also quite optimistic about next year."

“Since the start of sales, there have been some traffic accidents, both big and small, in Kyushu, but the safety feedback has been very good. I think we are on a good cycle. Since it is good, we don’t need to change it for the time being.”

"Your suggestion is excellent, and I appreciate it from the bottom of my heart. How about this, Mr. Zeng, let's meet again next month or in November to see if we can have a deeper collaboration between silicon carbon and CATL's lithium iron phosphate."

"If all else fails, we can temporarily halt the current IPO process for silicon carbon, and I can raise more funds to strengthen cooperation in this area."

When Kyushu went public, Yu Xing and Zeng Yuqun met in Lingang to discuss lithium iron phosphate and ternary lithium batteries. The meeting ended on bad terms, but there was an alternative intention to cooperate. CATL did not prioritize lithium iron phosphate in its next stage of R&D investment, and Lingang could take over the project through acquisition or joint venture.

At that time, Kyushu had not yet made a market impact, and Zeng Yuqun neither confirmed nor denied it, only saying that they would talk about it after the silicon carbon product was launched.

Six months later, the Silicon Carbon Group has initially qualified for this kind of in-depth cooperation.

Zeng Yuqun is truly helpless; he can even halt the IPO process. This determination is evident.

He sighed, "Mr. Yu, why bother? BYD has already started production of its second-generation ternary lithium batteries this year."

BYD began mass production of ternary lithium batteries in August, which are expected to be used in models such as the Qin EV next year.

This is not only due to competition with CATL, but also in response to the policy of Beijing Jingcheng Technology in February's "Key Special Project for New Energy Vehicles", which requires that the single cell density of passenger car batteries reach 200Wh/kg.

“President Zeng, our cooperation remains unchanged. We will cover the R&D costs, and the battery brand will still be CATL. What’s wrong with that?” Yu Xing didn’t explain the reasons, but simply said, “As for the competitiveness of the car, I am confident. Next year, our production capacity requirements will be even higher, so the joint venture factory can be built in Lingang. We also have a second-phase factory to go into production later.”

Zeng Yuqun paused for a moment, then asked, "Joint ventures and collaborations are both fine, but what about the future application of silicon-carbon batteries..."

Yu Xing laughed and said, "President Zeng, you've really thought ahead. We're doing this for our own use. If we're talking about things ten or twenty years from now, that's too far ahead."

Zeng Yuqun made up her mind and considered her schedule: "President Yu, then let's meet in Lingang at the end of October."

　My sleep schedule is all messed up, and there's another big storyline to figure out. I also have 5K tonight.

　　
　
(End of this chapter)