EV Battery Makers Could Lift Prices by 25%

Lithium carbonate costs have gone up fivefold over the past year.

March 28, 2022

The Inside of an Electric Vehicle

ALEXANDRIA, Va.—Morgan Stanley says that pass-through costs of lithium carbonate, a key ingredient in electric vehicle (EV) batteries, could push EV manufacturers to raise prices by as much as 15% and may hit demand, reports Bloomberg.

Chinese prices for lithium carbonate have increased fivefold in price over the past year, possibly leading EV battery makers to increase prices by close to 25%, said Morgan Stanley in a note seen by Bloomberg.

“Historically, the battery price cost curve had been declining at a pace of 3% to 7% annually for so many years in a row it almost seemed inevitable,” the analysts said in the note. “But molecules don’t play by the same rules as Moore’s Law. The world has changed, and along with it is a new paradigm of input costs.”

Bloomberg says the energy transition from internal combustion engine vehicles to EVs may be slowed by material shortages and refining capacity, as lithium carbonate prices have surged because demand from car makers has outstripped supply.

According to Morgan Stanley, most EV batteries are manufactured in China, and manufacturers purchase the material on the spot market instead of through long-term contracts. (Read Fuels Market News’ analysis of China’s dominance in the lithium battery market in “Will China Be the New OPEC?”)

Global supply-chain issues relating to the batteries and the minerals needed to produce them will only increase as countries, including the United States, move toward electrification of our transportation system, according to a recent Climate Corner article in NACS Magazine. Though EV batteries can last 10 years, or about 150,000 miles, until they need to be replaced, battery manufacturers are struggling to secure supplies of key ingredients to these large power packs, especially cobalt and lithium.

Another issue with EV batteries is the process of recycling or disposing of them. Lithium-ion batteries, which are EV batteries, are toxic and can catch fire and spread quickly—a danger that runs especially high when they are stored together.

Tesla is attempting to make the nickel used in its EV batteries more environmentally friendly by signing a deal with Talon Metals. The EV company will receive nickel supply from Talon Metal’s Tamarack mine project in Minnesota, which is a joint venture with Rio Tinto slated to open by 2026.

With gas at record-high prices, American consumer interest in EVs is increasing. In the week that ended March 13, one-quarter of shoppers on Edmunds.com said they would consider buying a hybrid, plug-in hybrid or EV, which is a 39% increase from the previous week and an 84% surge from the same week in February. Another survey found that more than two-thirds of Americans indicated they are nervous about rising fuel prices, and nearly half said EVs could provide a viable alternative to internal combustion engine (ICE) cars.

Within the Edmunds survey, consumers who said they weren’t interested in an EV cited high purchase costs, limited charging infrastructure and the vehicles’ range capacity. However, supply chain snarls, demand and low inventory levels have many new vehicles, including EVs, difficult to obtain. The majority of EVs are already reserved before they hit dealer lots.

A recent Convenience Matters podcast episode discusses how EVs are the future, another episode explains how convenience retailers can attract and retain EV customers, and another episode discusses the environmental impact of EVs.