Electric Car Battery Prices Rise As Lithium Costs Soar

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Tesla's Model S. Image credit: Tesla

Batteries for electric vehicles see price hikes in China, in spite of expected economies of scale, as costs of lithium and other raw materials jump

Electric vehicles may face rising battery costs in the coming year as battery makers in China raise prices due to the soaring cost of raw materials, a firm of industry researchers has said.

The findings by Benchmark Mineral Intelligence go against expectations that the rechargeable lithium-ion rechargeable batteries used in electric vehicles should decrease in price over time as economies of scale accompany an expanding EV market.

BMI chief executive Simon Moores said that while initial economies of scale gains had been achieved, the costs of raw materials, particularly lithium, were now leading to higher battery prices in China.

Price hike

If Korean and Japanese battery makers follow China’s lead, the price of batteries using cathodes made from nickel, cobalt and manganese could rise to about $115 (£84) per kilowatt hour (kWh) next year, up from $105 kWh this year, Moores said.

“The market may have to reposition itself for a period of rising battery cell prices, a new phenomenon for an industry conditioned to expect year-on-year falls,” he said in a research note.

BMI found that the price of lithium carbonate in China jumped more than 300 percent over the past year to $28,675 a tonne in mid-October, as stronger-than-expected demand outstripped supply.

Tesla’s increased adoption of lithium iron phosphate (LFP) batteries contributed to the increase in lithium carbonate prices in Asia, Metal Bulletin reported.

Nickel sulphate rose more than 30 percent in the 12 months to the end of September, exacerbated by widespread power shortages in China, BMI found.

Cobalt hydroxide prices were up more than 80 percent in the year to the end of September, according to BMI.

Raw materials

Chinese electric vehicle maker BYD last week said in a letter to clients it would increase the price of battery products by at least 20 percent effective 1 November, news outlet Caixin Global reported.

The company, which uses its batteries in its own EVs and supplies them to Toyota, Beijing Automotive Group and Ford Motor, said the higher prices affected all new orders, and that unexecuted existing orders would be cancelled.

Other small to mid-sized battery manufacturers have also announced price hikes, including Guangzhou Great Power and Jiangxi Neutron Energy.

The head of an unnamed battery factory told Caixin it would have lost 10 percent on each battery if it had not raised prices.

The strong EV market helped drive electric carmaker Tesla to a more than $1tn market valuation last week, the first automobile manufacturer ever to cross that threshold.

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