Historic high raw materials may hold back EV affordability

Continued price increases for battery materials such as lithium, nickel, cobalt and copper, as well as components, coupled with supply and logistics constraints, are headwinds for vehicle manufacturers and consumers electrical.

Affordability is one of the biggest barriers to electric vehicle penetration, as clean vehicles have a much higher total cost of ownership than conventional engines. The improvements seen so far could be put to the test in such a dire environment, which has been aggravated by the war in Ukraine, Kallanish understand.

“Electric vehicle costs will increase by at least 10-15% due to rising commodity prices,” predicts Julian Kettle, vice president of metals and mining at Wood Mackenzie. “Add to that rising electricity costs and the inevitable taxation, and the economics of electric vehicle ownership will worsen.”

OEMs with electrification goals will likely try to maintain their production and sales forecasts, but may also be forced to pass cost increases down the value chain to end users. Tesla has reportedly raised prices in the United States and China, while Lucid Motors says a price review will be inevitable.

Roland Zenn, Senior Director of Battery Materials Purchasing at Farasis Energy, calculates that battery cathode chemical costs in a Tesla Model 3 (60 kilowatt hours) have increased 430% year over year. The NMC battery (90:5:5) would result in battery hardware costs of $1,395 per vehicle in March 2021. On March 8, 2022, this jumped to $7,400.

The calculation is based on 38.8 kilograms of lithium hydroxide, 47.5 kg of nickel and 2.7 kg of cobalt, with the most recent prices at $63/kg, $100/kg and $80/kg , respectively.

Zenn notes, however, that Tesla also offers models with cheaper LFP cathodes; probably hedges commodity prices and probably has price averaging contracts or other bilateral price agreements in place. This means that it might not experience such cost increases.

Gabriela Farhangi


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