High battery metal costs add to electric vehicle sale slowdown – S&P Global
|A Tesla electric vehicle charging in Vermont on April 27, 2022. EV-makers already struggling with a shortage in semiconductors and other car parts must now battle to secure affordable metals.
Source: Robert Nickelsberg/Getty News Images via Getty Images
Rising battery metal costs have contributed to a slump in electric vehicle sales, slowing the transition to a low-carbon economy.
The average cost of making lithium-ion batteries used for EVs is increasing for the first time in roughly a decade, largely due to the inflated cost of key metals including lithium, cobalt and nickel. The trend has been toward lower costs for years as manufacturers scaled up production. But recent inflationary pressures on these raw materials have forced EV producers to increase the prices of their cars, together with pandemic-related lockdowns in China and supply chain challenges in the opening weeks of the second quarter.
Costly metals are undermining efforts to slash emissions in the transportation sector as consumers turn away from the already pricey cars. Sales of EVs plunged 35.6% in April in China, the U.S. and Europe’s top four markets, according to S&P Global Commodity Insights senior analyst Alice Yu.
The dip in EV uptake may only be a temporary glitch, as aggressive efforts to increase extraction of the key metals and experiments with alternative battery chemistries should eventually push down costs, according to industry experts. But in the near term, EV makers already struggling with a shortage in semiconductors and other car parts must now battle to secure affordable metals.
“One possible consequence of high materials costs is a delayed transition, especially if consumers shy away from adopting these clean technologies,” Tae-Yoon Kim, an analyst at the International Energy Agency, said in an interview. “The risks as we see from these rising material prices are either a slower or more expensive transition unless these material cost increases are also offset by the other cost reduction efforts.”
“Inflation is biting,” especially in EV markets outside of China, Commodity Insights’ Yu said May 31. “Some customers are delaying passenger EV purchase decisions, while others are trading down for a cheaper model despite having to wait months, or well into 2023, for some models.”
A perfect storm
The price for lithium shot up to record highs in the early months of 2022, after more than doubling in 2021. The lithium carbonate CIF Asia price increased 105% quarter over quarter in the first three months of 2022, reaching a high of $47,500 per tonne on March 31.
In the wake of the war in Ukraine, EV makers are also undergoing sticker shock for other key metals.
The price of nickel shattered records when it surged past $48,000/t in early March, with trading breaking down on the London Metal Exchange and resuming March 16 after a six-day halt. LME nickel cash prices had cooled to $26,731/t as of May 25, but the price remains 57.2% higher year over year.
Moreover, concerns over possible sanctions against Russia following its invasion of Ukraine have rocked nickel markets, with buyers of the base metal worried they will not be able to access supply from the major high-grade nickel producer.
Limited availability of cobalt has also inflated …….