Rising raw material costs, made worse by Russia’s invasion of Ukraine, could bring back Tesla chief executive Elon Musk and other auto executives’ dreams of rolling out more affordable electric vehicles. The rising prices of nickel, lithium and other materials threaten to slow and even temporarily reverse the long-term trend of falling battery costs, said Gregory Miller, an industry analyst. EVs are the most expensive part, hindering widespread adoption of the technology. Forecaster Benchmark Mineral Intelligence.
The charging socket on Ford Motor Company’s electric Mustang Mach-E vehicle is seen during a photo shoot at a studio in Warren, Michigan
photo credit: Reuters/Rebecca Cook
And it is at the top of a supply chain already grappling with the COVID-19 pandemic and global chip shortages.
“Rising raw material prices certainly have the potential to delay the timeline on cost parity between EVs and ICE vehicles, which could hinder widespread adoption of EVs,” Miller said of the market-dominated internal- Referring to combustion engine vehicles said.
He said this year could be the first increase in the average price of lithium-ion battery cells year-over-year.
The conflict in Ukraine has only raised the stakes, pushing nickel and aluminum prices higher on Monday on rising fears of disrupting exports from major producer Russia. Lithium prices have also risen, more than doubling since the end of the year, as supply has been outpaced by rising demand.
According to Benchmark Mineral Intelligence, Russia’s largest miner Nornickel produces about 20% of the world’s supply of high purity Class 1 nickel, which is used in EV batteries. Russia is also a major provider of aluminum used in batteries.
The logo of electric vehicle maker Tesla is seen near a shopping complex in Beijing, China
photo credit: Reuters/Tingshu Wang
To be sure, oil prices, which jumped Monday to their highest level since 2008, could serve as a counterbalance, after years of increased demand for gas-guzzling sport utility vehicles and pickup trucks for EVs. may generate more interest.
Rising EV prices — marked by hikes by Tesla and startup Rivian Automotive over the past year — matter because mainstream consumers aren’t going to pay a hefty premium for a technology that many don’t yet fully accept. Huh.
According to research firm Cox Automotive, the average EV sold in the United States in January for about $63,000, which is about 35% higher than the overall industry average for all vehicles over $46,000.
According to a Cox survey, consumers are less concerned about being stranded on the side of the road without electricity, but price is a major concern.
slow EV adoption
“Anything that adds to the cost hinders EV adoption,” said Cox analyst Michelle Krebs.
EVs made up about 9% of total global vehicle sales last year, according to the International Energy Agency, and consulting firm AlixPartners expects that share to reach about 24% by 2030.
Despite lower operating costs, more than half of consumers are unwilling to pay an extra $500 to buy an EV, according to a 2021 study by OC&C Global Speedometer on consumers in the United States, China and other countries.
This could put automakers in a bind if they want to attract mainstream buyers instead of the luxury customers they currently cater to.
Tesla has raised the price of its least expensive Model 3 sedan by 18% to $44,990 from December 2020, as supply chain issues weigh in. Musk also said in January that Tesla was not developing a $25,000 car it promised during 2020 Battery Day, adding that it has too many things on its plate.
Some US dealers have taken advantage of vehicle shortages to charge more for EVs, leading automakers such as Hyundai and Ford to warn.
Rivian tried to offset higher parts costs last week through a 20% price increase on its electric pickups and SUVs, but backlashed those who had already ordered when facing a backlash. which included the cancellation of a potential sale.
Another EV startup, Lucid Group Inc., has yet to raise prices, but Chief Financial Officer Sherry House said in February that the company was “definitely studying the price” to offset higher supply chain costs.
In China, rising lithium prices have pressured makers of entry-level models such as Great Wall’s Ora EV and Wuling Hong Guang’s Mini EV because they have less room to push through higher price tags, investors said. said.
For startups, the pressure is especially intense.
“If you’re a small company, you don’t have the ability to ask your suppliers to give you a lower price,” said Brett Smith, technology director at the Center for Automotive Research.
Industry officials said battery makers typically have long-term contracts with automakers, under which prices rise to reflect increased costs of key raw materials such as lithium, nickel and cobalt.
LG Energy Solutions, a supplier to Tesla and General Motors Co., said raw materials account for 70% or 80% of the cost of batteries.
Benchmark Mineral Intelligence said battery producers began increasing lithium-ion cell prices late last year in response to higher raw material prices during 2021.
(Reporting by Hyunju Jin in San Francisco, additional reporting by Zoey Zhang in Beijing and Editing by Hekyong Yang, Ben Kellman and Chris Reese in Seoul)
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