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Rising prices of nickel, lithium and other materials threaten to
slow and even temporarily reverse the long-term trend of falling
costs of batteries, the most expensive part of EVs, hampering
the broader adoption of the technology, said Gregory Miller, an
analyst at industry forecaster Benchmark Mineral Intelligence.
And that is on top of a supply chain already snarled by the
COVID-19 pandemic and the global chip shortage.
"Rising raw material prices certainly have the potential to
delay the timeline on cost parity between EV and ICE vehicles,
which could hamper the wider adoption of EVs," Miller said,
referring to internal-combustion engine vehicles that dominate
the market.
Graphic: Surging costs for critical battery ingredients may
undermine EV sales momentum,
https://fingfx.thomsonreuters.com/
gfx/ce/
byprjeelqpe/ChinaEVBattery
Ingredients.png This year could mark the first year-over-year
increase in the average price of lithium-ion battery cells, he
said.
The conflict in Ukraine has only raised the stakes, pushing
nickel prices to an 11-year-high on fears that exports from
leading producer Russia could be disrupted. Lithium prices also
have increased, more than doubling since year end, as supply
fell short of rising demand.
Russia produces about 7% of the world's mined nickel. It is also
a large provider of aluminum and palladium.
Rising EV prices - marked by hikes over the past year by Tesla
and startup Rivian Automotive - matter because mainstream
consumers are not going to pay a massive premium for a
technology that many do not yet fully embrace.
The average EV sold for almost $63,000 in January in the United
States, about 35% higher than the overall industry average for
all vehicles of just over $46,000, according to research firm
Cox Automotive.
While consumers worry less now about being stranded without
power on the roadside, price remains a major concern, according
to a Cox survey.
SLOWER EV ADOPTION
"Anything that adds to the cost will impede EV adoption," Cox
analyst Michelle Krebs said.
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 hit about 24% by 2030.
More than half of consumers are not prepared to pay $500 extra
upfront to buy an EV, despite lower operating costs, according
to a 2021 study by OC&C Global Speedometer on consumers in the
United States, China and other countries.
That could put vehicle makers in a bind if they want to attract
mainstream buyers, rather than luxury customers to whom they
currently cater.
Tesla raised the price for its least expensive Model 3 sedan by
18% to $44,990 since December 2020, as supply chain woes weigh.
Musk also said in January that Tesla is not developing a $25,000
car he promised during 2020 battery day, saying there are too
many things on his plate.
Some U.S. dealers have taken advantage of vehicle shortages to
charge more for EVs, sparking warnings from automakers like
Hyundai and Ford.
Rivian tried last week to push through a 20% price increase on
its electric pickups and SUVs to offset higher parts costs, but
retreated for those who had already placed orders when faced
with a backlash that included possible sale cancellations.
Another EV startup, Lucid Group Inc, has not raised prices yet,
but Chief Financial Officer Sherry House said in February the
company was "definitely studying price" to offset higher supply
chain costs.
In China, lithium price hikes have pressured the makers of such
entry-level models as Great Wall's Ora EV and Wuling Hong
Guang's Mini EV because they have less room to push through a
higher price tag, investors said.
For startups, the pressure is particularly intense.
"If you're a small company, you don't have the ability to tell
your suppliers to give you a lower price," said Brett Smith,
technology director at Center for Automotive Research.
Battery makers typically have long-term contracts with
automakers, under which prices rise to reflect the increased
cost of key raw materials such as lithium, nickel and cobalt,
industry officials said.
LG Energy Solution, a supplier to Tesla and General Motors Co,
said raw materials account for 70% or 80% of the cost of its
batteries.
Benchmark Mineral Intelligence said battery producers started
increasing lithium-ion cell prices late last year in response to
the higher raw material prices they had seen throughout 2021.
(Reporting by Hyunjoo Jin in San Francisco, additional reporting
by Zoey Zhang in Beijing and Heekyong Yang in Seoul, Editing by
Ben Klayman and Chris Reese)
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