Currently, the new energy vehicle (NEV) industry chain is undergoing a rigorous dual-cost "stress test." With prices for automotive raw materials and the memory (DRAM) crucial for smart electric vehicles surging, the industry is experiencing a significant reshuffle centered on profitability and cash flow management.

In early 2026, China's NEV industry encountered an unexpected cost upheaval, disrupting its development trajectory.

On one hand, lithium carbonate prices have exhibited extreme volatility, with sharp monthly fluctuations exceeding 25% in both directions, rapidly retreating from peak levels to prices seen at the beginning of the year. On the other hand, memory (DRAM) prices continue to soar, fueled by the growth of AI technology, leading to supply-demand imbalances and adding another layer of cost pressure for automakers.

Faced with these combined pressures, automakers—already entangled in price wars and operating on thin profit margins—are confronting unprecedented profitability challenges. A survey conducted by journalists from Auto Review revealed that this industry-wide cost shock has prompted deep reflection and strategic maneuvering around supply-demand dynamics and cost control.

Why Is Lithium Carbonate Price Volatility Like a "Roller Coaster"?

As the "food" for power batteries, every significant fluctuation in lithium carbonate prices directly affects battery manufacturers and, consequently, downstream vehicle production. It has become the primary variable disrupting automakers' cost structures and production plans.

Data indicates that lithium carbonate accounts for 40%-50% of power battery costs. For every 10,000 yuan/ton fluctuation in its price, the cost of a vehicle's power battery changes by approximately 500-800 yuan. For an automaker selling 100,000 units annually, this translates to annual cost swings of 50-80 million yuan. The extreme volatility in this round of lithium carbonate pricing is closely tied to rapid supply-demand shifts, market sentiment amplification, and industry chain competition.

Industry experts analyze that the "roller coaster" behavior of lithium carbonate prices stems from short-term supply-demand imbalances exacerbated by market speculation.

On one side, recent short-term disruptions have driven prices higher. For instance, the Jianxiawo lithium mine in Yichun, Jiangxi—a key regional supplier—faced supply restrictions in December 2025 due to local environmental concerns, limiting its lithium mica concentrate output. While market expectations initially anticipated increased supply upon resumption, slower-than-expected progress intensified fears of tightening lithium concentrate availability, making supply shortages a key factor driving up lithium salt prices.

Conversely, the precipitous price drop resulted from a rapid reversal in supply-demand dynamics. By late January 2026, as lithium mine maintenance facilities resumed operations, lithium carbonate supply rebounded quickly, narrowing the deficit. Simultaneously, power battery manufacturers reduced stockpiling efforts, sharply decreasing procurement demand. The market swiftly shifted from "undersupply" to "oversupply."

Additionally, speculative capital in futures markets taking profits exacerbated price declines. Data from the Guangzhou Futures Exchange shows that on January 26, 2026, trading volume for lithium carbonate futures reached 575,700 lots. Despite subsequent volume fluctuations, prices trended downward, with a single-day price change of -21,540 yuan/ton on February 2, reflecting a clear shift in market sentiment and supply-demand trends.

Multiple experts suggest that while lithium carbonate market supply and demand will gradually stabilize in the short term, with narrower price fluctuations, long-term trends remain uncertain due to factors like lithium mine capacity expansion and power battery demand shifts, continuing to test automakers' cost management flexibility.

AI Boom Triggers Sustained Memory Price Surge

If lithium carbonate volatility represents a "longstanding challenge" for automakers, the memory price surge has emerged as a "new dilemma" in 2026. As automotive intelligence accelerates, functions like smart cockpits, in-car entertainment, and advanced autonomous driving rapidly proliferate, transforming memory from an ordinary component into critical hardware for smart vehicle operation. Its price fluctuations now significantly impact automakers' costs.

The explosive growth in storage demand has dramatically increased automakers' reliance on memory. While traditional fuel vehicles once required just a few GB of storage for basic functions, modern high-end smart vehicles now demand 64GB or even 256GB, with some advanced autonomous driving models approaching TB-level needs. Higher vehicle intelligence directly correlates with greater memory demand and rising cost shares.

Meanwhile, the global DRAM market entered a "super bull cycle" in late 2025. Bloomberg reported that certain DRAM prices surged 75% from December to January, with "memory doom" becoming an industry buzzword.

Industry analysts attribute DRAM price hikes primarily to AI technology growth. AI servers require 8-10 times more storage than traditional servers, prompting tech giants like Microsoft and Google to secure multi-year high-end memory chip production capacity from Samsung, SK Hynix, and other leading manufacturers, with orders extending beyond 2027. This directly squeezes capacity for traditional industries like automotive.

Compounding the issue, memory chip production faces high barriers and long expansion cycles, with new capacity lines requiring 2-3 years to build. Faced with surging demand, supply cannot respond quickly, further driving price increases.

This supply-demand imbalance, driven by structural changes in AI infrastructure development, has shifted market power from buyers to sellers, meaning automakers will face prolonged pressure from high memory prices.

Industry estimates suggest that memory price hikes alone could increase per-vehicle manufacturing costs by thousands of yuan, with higher-end, intelligence-heavy models seeing more pronounced impacts. Over a dozen major companies, including Tesla and Apple, have warned that DRAM shortages will constrain production. Tesla CEO Elon Musk even stated that the company might need to build its own memory factories to overcome bottlenecks.

Cost Competition Will Reshape Industry Landscape

Research from UBS Investment Bank shows that a typical mid-sized smart electric vehicle faces cost increases of 4,000-7,000 yuan due to the triple challenges of reduced 2026 stimulus measures, restored purchase taxes, and rising commodity costs. In most mature industries, significant cost hikes would be passed to consumers, but this logic may not hold in China's current NEV market.

NEV demand has weakened since early 2026. Data from the China Passenger Car Association (CPCA) shows that 1.544 million passenger vehicles were sold nationwide in January, down 13.9% year-on-year. Mainstream automakers like BYD, NIO, and Xpeng all saw sharp month-on-month sales declines, with BYD's domestic passenger vehicle sales dropping approximately 62%.

Caught between profit and cash flow pressures, automakers must balance absorbing costs (further squeezing margins) or shifting them upstream, triggering industry-wide competition. With price wars persisting and market competition entering a "knife-fight" phase for market share, profit margins were already thin. Now, rising prices for key materials like memory and lithium carbonate have left many automakers facing "revenue growth without profit growth" dilemmas.

NIO founder William Li has stated, "Our biggest cost pressure this year isn't raw materials—it's memory. Prices have gone insane." Li Auto's VP of Supply Chain, Meng Qingpeng, warned that memory chip supply for the automotive industry might fall below 50% in 2026, forcing automakers into a "chip-grabbing" race. Compared to AI players, automakers often lack bargaining power and order scale, leaving them at a disadvantage in "unequal competition."

Even industry giants like NVIDIA and AMD are not immune. Foreign media reported that NVIDIA has stopped bundling GPU memory sales with AIB partners, forcing manufacturers to secure capacity and negotiate DRAM agreements independently. This development now delays next-gen GPU launches, with the RTX 50 SUPER series as the first example.

Meanwhile, NVIDIA's planned Rubin series graphics cards for FY2027-2028 have been indefinitely postponed, threatening release plans for the coming years. Counterpoint analyst MS Hwang noted that DRAM shortages will impact electronics, telecom, and automotive sectors throughout the year, with panic buying already evident in the automotive industry.

Industry insiders generally believe that the dual pressures of lithium carbonate volatility and memory price surges will not fully ease in the short term, subjecting the NEV industry chain to unprecedented cost tests. Raw material price hikes tend to follow cycles, but once elevated, they rarely decline quickly. As profits are compressed across the supply chain, weaker component manufacturers may be forced to accept losses or thin margins to secure orders, rapidly amplifying cash flow pressures and accelerating industry consolidation.

This cost surge resembles an industry-wide stress test, squeezing profit margins while redefining survival thresholds. While price wars dominate headlines, the fiercer competition unfolds behind the scenes—where scale, cash flow, and cost control, rather than mere sales volume or technology, determine whether companies can navigate this high-cost cycle. To cope, automakers are slashing internal costs, pursuing efficiency reforms, and accelerating overseas expansion, with Xpeng, NIO, and Li Auto all initiating overseas market布局 (layouts).

For automakers, the urgent challenge is to absorb cost pressures through supply chain optimization, technological innovation, and scaled production while navigating market competition and price fluctuations. For the entire industry chain, achieving a virtuous cycle of supply and demand, reducing speculation, and fostering healthy, orderly development are essential to helping the NEV sector overcome high-cost cycles through dual-wheel (intelligent and electric) driving forces.

Note: This article first appeared in the March 2026 issue of Auto Review magazine's "Hot Trends" column. Please stay tuned.

Image: Sourced from the Internet

Article: Auto Review

Layout: Auto Review