The price of a battery has been on the rise. This is due to a shortage of lithium, which is used in making batteries. Experts believe that these rising prices will continue as demand increases and more electronics are produced with integrated batteries
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The price of the metals that make up electric-vehicle batteries has risen sharply, bringing the cost of EVs to within spitting distance of gasoline-powered cars for the first time in a decade.
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Since 2010, the average price of a lithium-ion battery has dropped by 90% to about $130 per kilowatt-hour. Around $100 per kilowatt-hour is the magic amount that makes electric cars competitive with internal-combustion engines. Many predicted that the battery industry would hit that milestone in 2024, but that aim is becoming more difficult.
According to Benchmark Mineral Intelligence, which follows the global battery supply chain, lower prices helped raise EV sales by 112 percent in 2021 to more than 6.3 million units worldwide, compared to the previous year.
Prices for the major components in batteries are now skyrocketing. According to Benchmark, battery-grade cobalt costs increased by 119 percent from January 1, 2020, to mid-January 2022, while nickel sulfate prices increased by 55 percent and lithium carbonate prices increased by 569 percent.
“What’s going on in the supply chain is putting doubt on that $100 kilowatt-hour pricing,” said Benchmark’s chief analytics officer, Caspar Rawles. “We’ve heard from cell vendors that there would be huge price hikes for automakers.” Part battery-cell manufacturers have shifted from long-term fixed-price contracts to variable-price contracts, allowing them to pass on some of the expenses of increased metals prices to consumers, he added.
In Germany, Volkswagen workers work on an electric car production line in 2019.
Krisztian Bocsi/Bloomberg News photo
In recent years, most major U.S. and European automakers have moved their attention to electric cars, resulting in a surge in demand that soon surpassed supply. China, which controls the battery supply chain and has the world’s biggest EV market, has also grown EV manufacturing dramatically. Many battery ingredients might be in limited supply for years due to the seven to ten years it takes to start a new mine.
“You’ve got increasing demand for all these battery metals, and there’s this utter mismatch” between the mining and automotive industries, according to Daniel Clarke, a thematic analyst at GlobalData, a London-based data analytics firm.
According to Benchmark, the lithium industry would see its largest ever scarcity in tons in 2022 due to rising demand, labor issues, and Covid-19 interruptions. According to Benchmark, EV automakers in China have already begun hiking prices, with BYD Co. upping the sticker price on certain models by more than $1,000.
Elon Musk, the CEO of Tesla, has said that nickel is one of his top raw-material worries.
Susan Walsh/Associated Press photo
Elon Musk, the CEO of Tesla Inc., said last year that nickel was one of his top raw-material worries. On an earnings conference, he remarked, “Hopefully this message gets out to other mining businesses.” “Get a cent, please.” BHP Group Ltd., the world’s largest miner by market value, has agreed to supply Tesla with nickel.
New developments are often met with opposition from neighboring communities, citing concerns about increased supplies. Following a wave of protests, Serbia withdrew Rio Tinto PLC’s lithium exploration permits in January. “We’re thinking through what this implies for the project and our workers in Serbia,” Rio Tinto said in a statement.
Some variables may help to alleviate the supply shortage. Mining corporations can grow their present operations more quickly than they can start new ones. Battery recycling is a burgeoning industry with an ever-increasing supply. Furthermore, new battery chemistries may help to reduce demand for specific elements like cobalt and nickel.
Tesla’s push in China for a more inexpensive battery technology might bring some respite. According to official Chinese numbers, lithium iron phosphate, or LFP, batteries accounted for 57 percent of total battery output for automobiles in China last year, up from less than half the previous year.
In place of more costly metals like nickel and cobalt, the batteries’ cathodes are made of cheaper, more abundant iron. The technology’s disadvantage is that they generally have a lower range than normal nickel-cobalt lithium-ion batteries.
A facility in China, which controls the battery supply chain, produces car batteries.
Agence France-Presse/Getty Images/Str/Agence France-Presse
“LFP is a pretty great relief valve on those supply chain shocks,” said Gene Berdichevsky, CEO of battery-part manufacturer Sila Nanotechnologies Inc. and a former Tesla employee.
According to IHS Markit, the rapid surge in demand for LFP batteries last year helped drive lithium-ion battery prices up 10% to 20% in the latter months of 2021. Because LFP batteries employ lithium as an electrolyte, they are still subject to white metal pricing pressures.
According to Benchmark’s Mr. Rawles, slack in the lithium supply was essentially utilized up in 2021 as stockpiles were pulled down. Shortages in supply might force battery and vehicle manufacturers to shut down plants temporarily, increasing prices, he warned. According to Benchmark, demand for lithium carbonate equivalent, a typical measure for the refined metal used in batteries, increased by approximately 40% from the previous year to 491,896 metric tons in 2021, and is predicted to more than double to 1.1 million tons by 2025.
An alternate electrolyte might provide a solution to the lithium shortage. Last year, China’s Contemporary Amperex Technology Co., or CATL, the world’s largest electric-vehicle battery manufacturer and a Tesla supplier, announced a sodium-ion battery that reduced the quantity of lithium needed in the cell. CATL said it expects to develop a comprehensive supply chain for the battery chemistry by 2023, despite the fact that the technology is still experimental.
Experts warn that scaling up a new battery technology to commercial manufacturing has technological and logistical challenges. “CATL is quite optimistic on sodium ion,” Mr. Rawles said, “but any shift in technology is a gradual process.”
As new mining operations come online in the second part of the decade, choke spots in the battery supply chain should be smoothed out. In addition, despite increased material costs, EV pricing may continue to fall as more automakers enter the contest for market share.
Mr. Berdichevsky of Sila remarked, “I began constructing electric cars in 2001, I was employee 7 at Tesla, so I think in a very long arc.” “EVs will be the norm in ten years.”
Energizing Electric Vehicles
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Scott Patterson can be reached at [email protected]
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The “price of electric cars over time” is an interesting topic that has been a hot button issue for the past few years. The rising prices have created a lot of uncertainty in the industry.
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