Auto Stocks Plunge Amid Soaring Upstream Costs, Posing New Industry Challenge

Recently, the automotive sectors of China's A-share and Hong Kong markets have experienced significant volatility—surging collectively on March 11 (e.g., Geely Automobile rose over 9%, and CATL’s Hong Kong-listed shares gained more than 8%), only to undergo a broad correction by March 18, with leading companies like Li Auto, XPeng, NIO, and CATL all posting declines. Behind this turbulence lies intensifying upstream cost pressures: battery-grade lithium carbonate prices have surged nearly 130%, adding RMB 3,000–5,000 to the battery cost per vehicle. Compounding supply concerns, Zimbabwe has suspended lithium ore exports. Meanwhile, automotive-grade memory chips face capacity constraints due to AI industry demand, with DDR5 prices projected to skyrocket by 300% in Q1 2026, further driving up vehicle production costs. In response, numerous NEV manufacturers have already implemented price hikes, feature reductions, or eliminated discounts. Coupled with adjustments to purchase tax policies and the phasing out of local subsidies, automakers’ profit margins are being squeezed even further. Lithium resources are now becoming a critical competitive factor, leaving processors without secure resource access exposed to heightened risks.