Over the past two years, China's EV market has experienced brutal price wars. BYD declared "electric cheaper than fuel," Tesla adjusted prices repeatedly, and joint venture brands were forced to follow. On the surface, this appears to be a battle for market share among automakers. But looking upstream along the industrial chain reveals a more fundamental shift: EV pricing power is moving from automakers to core suppliers.
The most typical manifestation of this shift is batteries. Traction batteries account for 30 to 40 percent of the total cost of an EV. Contemporary Amperex Technology and BYD's FinDreams Battery together hold more than half of the global market share. This means that any automaker unable to secure competitive battery prices has almost no chance of taking the initiative in vehicle pricing. In the first half of this year, lithium carbonate prices plummeted from 500,000 yuan per ton to below 100,000 yuan. Automakers that signed long-term agreements with battery suppliers enjoyed the benefits of cost reductions, while second-tier brands lacking bargaining power were forced to participate in the price war at higher costs, finding themselves in a very passive position.
Chips are another overlooked critical link. A conventional fuel vehicle requires only a few hundred chips, while a smart EV needs more than two thousand. In the field of autonomous driving, NVIDIA and Qualcomm have nearly monopolized the market for high-performance computing chips. Any automaker wanting to launch a model with urban navigation assisted driving capabilities cannot bypass these two suppliers. This dependency creates a peculiar phenomenon: while vehicle prices continue to fall, the price gap between high-end smart driving versions and standard versions remains at 20,000 to 30,000 yuan, with much of this profit flowing to chip suppliers.
Mega-casting technology is also reshaping power structures within the supply chain. Tesla pioneered the use of 6,000 to 9,000-ton casting machines to form the entire rear vehicle body floor in a single piece, a component previously made from over 70 parts. This technology dramatically reduces welding costs and assembly time. However, it requires automakers to purchase expensive casting machines from equipment suppliers and source specialized heat-free aluminum alloys from material suppliers. Key enterprises controlling equipment and materials have thus gained unprecedented bargaining power.
Facing this landscape, leading automakers are attempting a "reverse power grab." BYD has brought batteries, chips, motors, electronic controls, and even most components into its in-house production system through vertical integration. Tesla is also developing its own chips and batteries. However, this approach requires enormous capital and technological accumulation, putting it out of reach for most automakers. It is foreseeable that profit distribution in the auto industry will increasingly tilt toward suppliers with core technologies, while automakers may gradually transition from "dominant players" to "integrators" and "brand operators."