Rising material costs, worsened by Russia’s invasion of Ukraine, might put Tesla CEO Elon Musk and other auto executives’ plans to roll out more cheap electric vehicles on hold.
According to Gregory Miller, an analyst at industry forecaster Benchmark Mineral Intelligence, rising prices of nickel, lithium, and other materials threaten to slow or even reverse the long-term trend of falling costs of batteries, the most expensive part of EVs, impeding broader adoption of the technology.
That’s on top of a supply chain already clogged by the COVID-19 outbreak and a global chip scarcity.
“Rising raw material prices certainly have the potential to delay the timeline on cost parity between EV and ICE vehicles, which could hamper the wider adoption of EVs,” Miller said, referring to internal-combustion engine vehicles that dominate the market.
The average price of lithium-ion battery cells could rise for the first time this year, he predicted.
The conflict in Ukraine has only heightened the stakes, sending nickel and aluminium prices to new highs on Monday amid rising fears that exports from Russia, the world’s largest producer, may be hampered. Lithium prices have also risen, more than doubling since the end of the year, as supply has fallen short of demand.
According to Benchmark Mineral Intelligence, Russia’s largest miner Nornickel produces roughly 20% of the world’s supplies of high purity class 1 nickel, which is utilised in EV batteries. Russia is also a significant supplier of aluminium, which is used in batteries.
To be sure, rising oil costs, which hit their highest levels since 2008 on Monday, may act as a counterweight, stimulating greater interest in electric vehicles after years of rising demand for gas-guzzling SUVs and pickup trucks.
Rising EV pricing, as evidenced by hikes by Tesla and Rivian Automotive in the last year, are significant because mainstream consumers are unlikely to pay a significant premium for a technology that many do not fully embrace.
According to research firm Cox Automotive, the average EV sold for about $63,000 in January in the United States, roughly 35% more than the overall industry average for all vehicles of little over $46,000.
