Are you ready to switch to an EV? Here’s why you might find yourself out of the market

By Claudia Assis

It wasn’t supposed to be like this.

This year will likely be the first that electric vehicle battery costs will rise, rather than continuing the steady decline they have seen for more than a decade.

And EV buyers are seeing the result: several automakers, from newcomers such as Rivian Automotive Inc. (RIVN) to established players such as Tesla Inc. (TSLA), have raised their EV prices. The move affected everything from mainstream electric sedans to coveted muscle cars with full order books and even Ford Motor Co.’s (F) EV version of the F-150 pickup truck, the vehicle that reigned supreme. master as the best-selling vehicle in the United States for decades

Supply chain issues and shortages have kept auto prices up and inventories depleted for the better part of two years. For electric vehicles, however, there is another layer of complexity, as manufacturers scramble to secure lithium and other metals used in the production of electric vehicle batteries as part of a new push to make them mainstream.

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“Prices are definitely going up and the cost of metals that go into batteries has gone up significantly,” said Michelle Krebs, an analyst at Cox Automotive.

The average price of an EV in August was $61,955, up 7.8% from $57,472 in August 2021, according to Edmunds.com. That compares to an average of $47,195 for all vehicles in August.

Edmunds collects prices for vehicles sold through dealerships, so Tesla electric vehicles are not included in these calculations because it sells its cars directly to consumers.

Edmunds analysts have estimated that the average price of electric vehicles would hover around around $65,000 with Teslas taken into account. Rivian electric vehicles are also not included in the estimates due to their still low volume.

“Price is the main barrier to mass adoption of electric vehicles,” while other barriers, such as range and charging concerns, have become less of a concern for drivers, Krebs said.

Prices for lithium compounds and other metals used in batteries have risen by triple digits as Tesla plans to enter the lithium refining business

China, the world’s biggest market for electric vehicles, “dominates the supply chain for manufacturing lithium-ion batteries,” including processing minerals and raw materials, the energy ministry said in a statement. recent note.

The United States “rely on international markets for the processing of most lithium battery feedstock,” it said in a report outlining policy steps to break that dependence.

Lithium-iron phosphate battery cell costs rose 84% from May 2021 and peaked in March at 153 kWh before falling back to around 143 kWh in July, said Yayoi Sekine, storage manager of the energy at BNEF.

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These prices are based on averages of spot commodity prices, and actual prices may be lower as many battery makers and automakers have entered into supply agreements to mitigate volatility, she said. .

Battery costs represent the lion’s share of electric vehicle costs, accounting for approximately 30% to 50% of passenger electric vehicle costs, as the share varies by model and vehicle line.

There is little relief in sight for this year.

“The supply-demand balance for all battery metals, lithium, cobalt, nickel, aluminum, is tight for 2022,” Sekine said. “Lithium carbonate costs have had the biggest impact on battery prices, and BNEF expects prices to remain high for the remainder of 2022 and 2023.”

Mining capacity is expected to increase next year and in 2024 after industry investments, but “industry may continue to be constrained in the long term if additional mining supply does not increase,” Sekine said.

General Motors Co. (GM) unveiled the Chevrolet Equinox compact electric SUV last week, promising it would cost around $30,000, slightly more than the Chevy Bolt, but boasting a body style that has been popular in the United States ever since. decades.

There will be a wait though, as the EV is expected to go into production in 2023 for some models and expand to a full range by 2024.

Electric vehicle buyers are at the top of the income brackets, and expensive vehicles such as Rivian and Ford electric pickup trucks have order books that are likely to be “pretty heavy for a while,” Cox’s Krebs said. Automotive.

Demand hasn’t been an issue and consumers will see cheaper options appear, she said.

A tipping point?

Venkat Srinivasan, director of the Collaborative Center for Energy Storage Science at Argonne National Laboratory, sees something of a tipping point for electric vehicles.

“We are still scratching the surface when it comes to EV market share,” but there are two important changes, he said.

“People see electric vehicles as one of the options. They see more of them on the road. They see their neighbors buying an electric vehicle, so there’s a familiarity,” Srinivasan said. “They also increasingly see that we need to do something about the climate emergency.”

The share of electric vehicles on US roads has steadily increased over the years. Edmunds.com says market share grew to 4.8% from January to August, compared to 2.3% over the same period in 2021.

Additionally, the national monthly market share of electric vehicles has remained above 5% since May 2022. Wall Street expects this market share to increase significantly thanks to California’s recent decision to ban sales of new gasoline vehicles by 2035.

The battery supply chain is trying to catch up with the increased demand, and it takes time to build that chain, Srinivasan said.

Innovations in battery composition are in preparation. Tesla said in October 2021 it was switching to cobalt-free battery chemistry for all of its standard-line vehicles, rather than an option only for some Model 3 versions.

So the trend to use less cobalt is there “as we speak,” Srinivasan said. Efforts to use less nickel could take a few years to materialize, and using silicon for battery anodes appears to be a “promising” alternative, he said.

Research into solid-state batteries, which are safer and more energy-dense, among other benefits, is ongoing but likely still years away, he said.

Solid-state batteries are so called because they replace liquid or gel electrolytes with a solid electrolyte such as ceramic.

Batteries costing around $65 per kWh will likely power cars most people could afford, Srinivasan said.

-Claudia Sitting

 

(END) Dow Jones Newswire

09-17-22 0815ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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