China’s electric vehicle industry is encountering fresh cost pressures as metal and memory chip prices climb, according to a research note by UBS analysts led by Paul Gong. The team projects that expenses for a typical mid-sized smart EV could rise by 4,000 to 7,000 Chinese yuan (approximately $575), although it remains unclear whether manufacturers will fully pass these increases on to buyers.
UBS bases its estimates on average material requirements of 200 kilograms of aluminum and 80 kilograms of copper per vehicle. Over the past three months, aluminum prices have increased by about 600 yuan and copper by about 1,200 yuan. Lithium costs have also surged, rising between 1,000 and 3,800 yuan. On top of raw material inflation, the research note highlights a sharp uptick in memory chip prices: DRAM costs for modern vehicles, which previously averaged around 700 yuan per car, have jumped by roughly 180 percent, pushing unit costs close to 2,000 yuan.
Historically, widespread commodity cost hikes tend to be passed through to end customers. However, the analysts caution that China’s EV makers now face a confluence of challenges—recent stimulus reductions, a new 5 percent purchase tax effective January 2026 and softer consumer demand. Given the industry’s already thin margins and intense competition, fully absorbing these cost increases could effectively eliminate profitability for many manufacturers.
Looking ahead, UBS suggests that suppliers may ramp up capacity to address price signals, or weakening demand could help stabilize commodity prices. In the near term, however, the sector is likely to remain under pressure.
The report also notes that rising global demand for data centers, driven by advances in artificial intelligence, is intensifying the memory shortage that affects EV production. Meanwhile, domestic spot prices for battery-grade lithium carbonate have climbed about 80 percent in the past two months, according to CnEVPost data.
Source: CnEVPost
