EV sales remain strong despite rising battery costs

As sticker prices continue to rise, buyers around the world are queuing up to buy electric cars this year, reversing the script of a decade and a half of the conventional auto industry that EV sales will begin as soon as battery costs fall below a threshold. Just across the horizon.

This year, demand for EVs has remained strong, although the average cost of lithium-ion battery cells has risen from $ 105 last year to an estimated $ 160 per kilowatt-hour in the first quarter. Costs have risen due to supply chain disruptions, sanctions on Russian metals and speculation by investors.

For a small car like the best-selling EV Hongguang Mini in China, the high battery cost adds about $ 1,500, equivalent to 30% of the sticker price.

But the cost of petrol and diesel fuel for internal combustion vehicles has also skyrocketed since Russia invaded Ukraine, and experts point out that environmental concerns are also forcing more buyers to choose EVs despite the volatile economy.

Manufacturers from Tesla to SAIC-GM-Wuling, which makes the Hanguang Mini, have borne the high cost to customers with double-digit price increases for the EV.

More may come. Andy Palmer, chairman of Innobat, a Slovak EV battery maker, said the battery industry’s margins were already slim, so “rising costs will have to go through car manufacturers.”

Vehicle manufacturers such as Mercedes-Benz may reach out to consumers if the price of their raw materials continues to rise. “We have to keep the margins,” Marcus Schaefer, chief technology officer, told Reuters.

But EV buyers haven’t stopped yet. EV-volumes.com estimates that global EV sales increased nearly 120% in the first quarter. In March, China’s Neo, Xpeng and Li Auto sold record EVs. Tesla delivered a record 310,000 EVs in the first quarter.

‘Different types of tipping points’

Venkat Srinivasan, director of the National Laboratory’s Center for Collaborative Energy Storage Science at the U.S. government’s Argonne in Chicago, said: He said “more people” would buy EVs, despite the cost of batteries and cars.

This spike in battery consumption could be a blip in the long-term trend where technological advances and rising production costs have reduced it for three decades. Industry data shows that the average cost of $ 105 per kilowatt hour in 2021 was about 99% lower than 1991 7,500 in 1991.

Experts say battery consumption could rise over the next year or so, but then another big drop could probably be saved by automakers and suppliers as a measure of large-ticket investment in mining, refining and battery cell production, and diversification of raw material sources. Surplus balance tip from.

“It’s like a bubble – and for that bubble to settle, it’s going to be at least the end of 2023,” said consultant Prabhakar Patil, a former LG Chem executive.

British battery company BritishVault will begin battery production in 2024 at a 45-gigawatt-hour plant in north-east England. Isobel Sheldon, chief strategy officer, said the advice the company was getting from raw material suppliers was “don’t fix your prices now, wait 12 months and then fix prices because everything will be more stable.”

“We should be behind this excessive protection of resources until then,” he said.

Supply beat demand

The industry has long been waiting for the battery cell cost threshold of $ 100 per kilowatt-hour, as a signal reached the equivalent price of fossil-fuel equivalents. But with the rise in gasoline prices and changes in consumer preferences, analysts say, it is no longer important.

According to Stan Whittingham, co-inventor of the lithium-ion battery and 2019 Nobel laureate, the demand for EV batteries in China and other markets is growing “faster than people think – faster than material supply”.

Concerns about the environment and climate have prompted consumers, especially young people, to choose EVs instead of burning fossil fuels, said Chris Burns, chief executive of Novonix, a Halifax-based battery maker.

“A lot of young people entering the market are deciding to buy out of the general economy and say they will only run an EV because they are good for the planet,” Burns says. “They’re sinking despite being cheap” for gas-powered cars.

“I don’t think we’re going to stop seeing reports trying to show that the price of batteries is dropping to $ 60 or $ 80 per kilowatt-hour as an ambitious target, but it’s possible that they may never be met,” he said. “However, that doesn’t mean EV acceptance won’t increase.”

Reporting by Paul Leonart in Detroit and Nick Kerry in London; Edited by David Gregorio

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