rise in electric vehicle price due to rising global lithium price

Lithium battery rising prices are going to impact the cost of EVs. The three major materials required to build a lithium-ion battery have been going up since the start of the year, according to Goldman Sachs analysts in March 2021. They also pointed out that the tendency will drive battery prices up by 18%, reducing manufacturers’ profits. In this blog we will explore how electric vehicle price will rise in India in Q2 and Q3.

According to the analysts, if this happens, EV consumer costs would climb because the battery accounts for up to 60% of the vehicle manufacturing expense. They did not provide many details on the extent of the additional expense, but they did provide a hypothetical scenario.

One of the causes for the anticipated rise in material usage is the drive for larger batteries with longer ranges. Fortunately, several initiatives are ongoing to improve charging station accessibility, including efforts to bring charging stations closer to drivers.

Despite this, many potential EV purchasers naturally consider greater ranges to be the better option. This notion fuels the need for larger batteries, which necessitates the use of additional materials. 

How lithium price will impact the Electric Vehicle price in Q3 and Q4 of 2022?

Click here to know Why lithium price is rising in the global market?

The cost of batteries is rising due to the rising costs of metals such as lithium, nickel, and cobalt, which are the fundamental ingredients of the cell, as well as supply chain bottlenecks.

While traditional automakers in India are experiencing a global shortage of semiconductors, the country’s electric vehicle (EV) manufacturers are now experiencing a shortfall of lithium-ion batteries, a critical raw material.

Since the beginning of 2021, battery makers claim that prices have risen every quarter.

Cell prices have increased by an order of magnitude since January 2021. We all know that the cell accounts for 70% of the cost of a battery. As a result, by the beginning of Q3, this exponential spike in the price of lithium will be reflected in the pricing of electric vehicles. This is due to a considerable increase in the demand for electric vehicles in India.

In November 2021, 42,067 electric vehicles were registered, marking the first time that EV sales surpassed 40,000 units.

India does not manufacture cells, which are an essential component of a battery pack.  After the pandemic, the mines in Congo, the world’s largest producer of lithium, are closed.

At Inverted we have to increase the price of the batteries by 12-13%. All other lithium batteries manufacturers or traders in India have also increased the price of lithium batteries and because of which the EV manufacturers will increase the price of the EVs. 

Of course, as of now, the EV manufacturers are busy delivering the EVs to the clients who have registered the EVs last year. This updated price will impact the consumers who are now registering the EVs as they will receive their EVs by Q3 of 2022.

While EV manufacturers have not passed on the entire price increase to customers, industry leaders believe that a new round of pricing increases by cell makers will undoubtedly increase EV prices.

In November, Revolt Motors increased the price of their flagship RV400 electric bike by Rs 18,000. Not just Revolt, but also Hero Lectro, Hero Cycles’ electric bicycle brand, raised the prices of its products by up to Rs 5,000.

With a maximum localization of 50%, most EV manufacturers, especially those producing two-wheelers, are now reliant on imports for their raw materials. As a result, they have a limited ability to withstand price increases, according to a two-wheeler EV manufacturer’s executive.

Last year, the government increased the subsidy from Rs 10,000 to Rs 15,000 per Kwh (Kilowatt hour), as well as the cap on the incentive for electric two-wheelers from 20% to 40% of the vehicle’s cost.

Battery recycling activities are increasing as the shortages persist. As more batteries reach the end of their lives, the expansion in cobalt recycling is being driven by a continuous increase in commercial-scale recycling.

Executives from battery recycling companies, on the other hand, claim that India lacks well-established collection mechanisms and regulatory frameworks to provide an adequate secondary supply for manufacturers.

How rising electric vehicle price can be controlled?

  1. Battery Recycling
  2. Battery Swapping

How elements like Cobalt, Nickel, and Graphite impact the electric vehicle price rise?

By 2030, it is expected that the lithium batteries will meet future electric transportation, electric aviation, and stationary grid energy storage requirements.

Electric vehicle batteries rely on a variety of rare materials, including lithium, nickel, and cobalt. With the growth of the electric vehicle sector, the consumption of these rare elements is likely to rise, potentially causing supply chain challenges in the future because rare element availability is concentrated in only a few nations.

According to a report by independent research organization A.T. Kearney Energy Transition Institute, while the global electric vehicle (EV) market is already growing exponentially, the EVs manufacturers may face some roadblocks ahead as they struggle to get the supplies of raw materials used in battery production. Failure to get a sufficient supply of lithium, nickel, manganese, or cobalt could hamper the transition to electric vehicles, raising their costs and jeopardizing carmakers’ profit margins.

A lack of practical and cost-effective reuse and recycling solutions for electric car batteries worsens the current natural resource deficit.

Cobalt Market Analysis

Cobalt is appreciated for its stability, hardness, anti-corrosion, and high-temperature resistance qualities. The global Cobalt market has certainly got benefited from the global shift to the green economy.

Apart from EV batteries, Cobalt is utilized in the production of alloys, airplanes, mechanical equipment, and portable electronics, such as smartphones and laptops, which account for 36.3% of global off-take. Cobalt consumption is dominated by automotive applications, accounting for 23% of total consumption.

Cobalt is mined as a by-product of copper and nickel mining, although it is also mined in the Democratic Republic of the Congo (DRC) and Australia. Last year, Congo accounted for 67% of global supplies, and this trend is expected to continue in the coming decades. However, as Congo is seen to be unstable, with a corrupt governmental and corporate environment and growing concerns about child labor issues, there are growing concerns about the reliability of future supply.

Cobalt refining, on the other hand, is concentrated in China, which accounts for 66% of worldwide refined cobalt, and the Chinese monopoly is projected to last for many years. Finland is a distant second in terms of output, accounting for 10% of the total. 

Both big refiners rely on Congo for their feedstock, making them exposed to upstream supply disruptions.

Price-wise, Cobalt is one of the most expensive metals in Electric Vehicles batteries. It costs between $33,000 and $35,000 per tonne. Cobalt is currently valued at $70,500 per tonne, up 119% since the beginning of 2021.

Finding a replacement for Cobalt in EV batteries could be one answer. Contemporary Amperex Technology, a large Chinese company, already makes batteries that use phosphate instead of nickel-cobalt-aluminum (NCA) or nickel-cobalt-manganese (NCM) combinations. That has caught the interest of one of the leading EV manufacturers, US-based Tesla Inc, with rumors claiming the business is working on a Cobalt-free battery, though no period has been set.

Nickel Market Analysis

By 2025, nickel demand in lithium-ion batteries might reach a 20% share of total consumption.

Lithium-ion batteries, which are used in electric vehicles, contain nickel as a key component. It enables producers to use less Cobalt, which is more expensive and has a more opaque supply chain, while yet cramming more energy into batteries.

The demand for electric vehicles has the potential to have a big impact on the nickel market. Nickel prices rose to $22,745 a tonne in January 2022, the most in a decade. The question of where all of this Nickel will come from remains unanswered. According to a Bloomberg story, supplies will be scarce for the next three years, with a significant shortage possible as early as 2023 as demand climbs.

While timetables vary, experts agree that a Nickel shortage is likely, especially because the battery business demands a better grade of Nickel than the stainless steel industry.

Elon Musk, the CEO of Tesla, has previously expressed concern about potential Nickel shortages, which could limit battery efficiency and storage capacity, as well as make them more expensive to manufacture.

Indonesia has the world’s largest nickel reserves, which it uses to entice investment in the battery supply chain. Around a quarter of the world’s nickel supply is held by Australia.

As a result, the major EV manufacturers are securing supply to meet the increasing global demand for electric vehicles. 

Nickel prices are projected to revert to their historical highs as supplies of the metal begin to ramp up. 

Graphite Market Analysis

Graphite is the most common anode material used in lithium-ion batteries. All major battery chemistries include graphite, which has a higher mass per kWh than cathode raw elements like lithium, cobalt, or nickel.

Because graphite anodes can handle the flow of lithium ions during charging and discharging, LIB uses them. Demand for graphite for batteries is expected to climb 19% per year until 2029, driven by development in the electric vehicle and energy storage markets.

In recent months, the battery industry has experienced a graphite shortage.

China currently manufactures 79% of lithium-ion cells and 80% of the chemicals used in lithium-ion batteries. 

Tesla has secured an arrangement with Australia’s Syrah Resources to supply natural graphite to lessen its reliance on China for essential raw materials for its LIB.

Syrah will supply Active Anode Material (AAM) from its Vidalia, Louisiana-based vertically integrated AAM production facility. Syrah will get its graphite from a mine in Balama, Mozambique, which is one of the world’s largest graphite mines.

When it reaches nameplate capacity, the US$200 million mining operation, which spans 110 square kilometers, will be the world’s largest graphite-producing mine. The quality of graphite produced here is estimated to be roughly double that of ‘normal’ graphite deposits in China and Brazil, with a life-of-mine total graphite content (TGC) of about 19 percent. In 2019, the commercial production of Syrah began.

What’s the future?

The transition to electric vehicles necessitates the use of batteries. We are currently unable to meet the demand for electric vehicles, but due to supply chain reversals for crucial raw materials, we will soon be unable to produce enough EV batteries. Investment in raw-material extraction, recycling, and the development of alternative technologies is required to ensure supply.

In the face of escalating geopolitical tensions, countries need a long-term strategy to fight supply chain limitations.

We can revolutionize battery chemistry, increase recycling rates, and substantially expand mining of essential materials, but the transition to EV transportation will remain a bleak reality unless stakeholders address the issue quickly.