The Chinese battery manufacturer CATL exited its 2019 investment in Pilbara Minerals, as well as reportedly launching a discounted battery price for domestic automakers predicated on a falling lithium carbonate price. 

Following rising battery costs in 2022 due largely to rising material costs, CATL’s discount battery scheme in early 2023 suggests a change of direction. CATL has cashed in its 2019 investment in Pilbara Minerals, with a 4.9% holding netting a return on investment of over 13x. It would appear that the divestment does not impact on the 2020 offtake agreement made between Pilbara and Yibin Tianyi, a battery chemicals maker in which CATL is a major shareholder. 

These two recent news events suggest that either, CATL is signalling clearly that materials costs, and lithium in particular, are set to fall in 2023 and is looking to be the first to lock in newly discounted supply agreements, or as a reaction to higher prices in 2022 is looking to out-compete its smaller battery rivals by being able to weather a temporary period of high material prices. 

In either scenario, the world’s biggest battery supplier is signalling that material prices will need to fall eventually. That is counter to a lot of the noise made on social media, but largely in line with the last three months of spot rate contraction in lithium prices. Commodity market prices are ultimately set by the supply chain and CATL is a big player in that supply chain.