Have you ever wondered how Chinese brands like BYD and MG are able to price their electric cars so much cheaper than any other brand? We did, so we decided to investigate.

Until now, automakers have told us that the real reason electric vehicles are so expensive is because lithium-ion batteries cost so much to manufacture.

Hyundai Senior Manager Future Mobility Scott Nargar said CarsGuide earlier this year that the sudden surge in demand is making it difficult for current lithium mines to keep up.

“Everyone wants the same very limited supply of raw materials for batteries,” he said.

“There are already very established mining industries for cobalt and copper, but it’s the lithium that goes into lithium-ion batteries that drives up their costs.

“There are about six different battery manufacturers and a huge demand for a limited amount of batteries.”

Kia Australia product manager Roland Rivero also said at the time that the higher price of electric cars compared to petrol and diesel cars was due to the cost of manufacturing the batteries.

“Battery costs (the raw materials that make up the battery) are not going down and supply is generally limited relative to demand,” he said.

The higher price of electric cars compared to gasoline and diesel cars is due to the cost of battery production. The higher price of electric cars compared to gasoline and diesel cars is due to the cost of battery production.

This would explain why the little electric Kia Niro starts at $66,590 excluding on-road costs. That’s the price of a large gasoline SUV, but also the price of an electric small SUV.

We are told that until Australia starts opening and operating large lithium mines and until they are operating at full capacity, then EV prices will remain high. That could be ten years from now.

We kind of came to terms with it and with the idea that until the batteries get cheaper, the prices of the cars that had them will remain high.

Then came the Chinese brands with an offer of electric cars, which mercilessly undermined their rivals.

The MG4 is the same size as the Kia Niro and has the same 64kWh battery. But while Kia is asking more than $66K, MG is charging just $44,990.

BYD's Seal has an 82.56 kWh battery in the premium class that costs $58,798. BYD’s Seal has an 82.56 kWh battery in the premium class that costs $58,798.

How is this possible? Is the Kia supercharged? Does MG have better access to battery raw materials?

Kia is not supercharged. Even Tesla can’t match the prices of Chinese brands. The Model 3 with an 82kWh long-range battery costs $71,900. The rival BYD Seal sedan also has an 82.56 kWh battery in the premium class, which costs $58,798.

Hyundai offers the Ioniq 6 with 77.4 kWh, and the most affordable version is $71,500.

So what is it about?

Hyundai COO John Kett shared his perspective on how Chinese brands are able to price their EVs so competitively. CarsGuide.

Hyundai offers the Ioniq 6 with 77.4 kWh, and the most affordable version is $71,500. Hyundai offers the Ioniq 6 with 77.4 kWh, and the most affordable version is $71,500.

“I don’t think we ever will. [have] price points like them,” he said.

“BYD has its own battery supply chain. And if you don’t have a supply chain, then you’re relying on a government body or CATL, so they have scale and they definitely have a cost advantage over us.”

BYD is now the world’s largest manufacturer of electric vehicles, but long before it made cars, it was a manufacturer of rechargeable batteries. Now, BYD is the world’s second-largest lithium-ion battery maker behind China-based CATL.

“As much as we talk about their EV credits, and it’s very strong, I think they’ve exported over two million cars from China through September this year, and 75 percent of those cars are ICE (internal combustion engine) cars. Kett said.

“So all that excess capacity and depreciated transmission and engine equipment, that’s why they can price so aggressively in their ICE cars and then complement that with their EVs.

The MG4 is the same size as the Kia Niro and has the same 64kWh battery, but it's almost $22,000 cheaper. The MG4 is the same size as the Kia Niro and has the same 64kWh battery, but it’s almost $22,000 cheaper.

“I think the whole world is going to face the same reality that we’re seeing — the Chinese, where the ICE opportunity is, they’re maximizing because of the fact that they have scale, and we’re going to see that impact here. And their EVs will take their place.”

So not only do Chinese brands appear to be in a better position to source the most expensive part of an electric car – the battery – by either making it themselves or with government help, but the sheer scale of their operations means they are willing to undercut and absorb the loss of earnings.

That’s it for now, because you can bet that once MG and BYD settle in Australia, prices won’t stay the cheapest.

So what happens when lithium prices fall? Well, they already are. The price of lithium carbonate has more than halved since January of this year, and as demand for EVs slows in the US and Europe, it is predicted that there will be an oversupply in 2024 and 2025.

Will this mean cheaper electric cars for Australians? Well, recently we have seen many brands cut prices, but not by half, and too often Chinese brands have cut prices in competition with each other to remain the most affordable.

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