How the battery metal shortage and overall battery cost could slow electric vehicle sales

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Mass adoption of electric vehicles (EVs) could be further dampened by rising prices for metals – such as lithium, cobalt and nickel – used in EV batteries.

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“Sharp increases in battery feedstock prices since the start of 2021 are prompting speculation of demand destruction or delays, and led to beliefs that automakers may shift their preferences for their electric vehicles,” according to a report. Standard & Poor’s blog post.

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S&P adds that the cheapest type of battery has always been lithium-iron-phosphate (LFP), which Tesla has used for its entry-level models made in China since 2021. Other automakers such as Volkswagen and Rivian also announced that they will use LFP in less expensive models, S&P added. Lithium prices have jumped more than 700% since the start of 2021, which has led to a sharp increase in battery prices.

Addressing the auto industry‘s rapid shift to electric vehicles, Toyota chief scientist Gill Pratt said last week that “the world has thought about this in too simple a way”, according to Seeking Alpha, warning, “there’s going to be this crunch [of] not enough materials” – and that conditions are likely to remain “harsh” in the short to medium term.

Cobalt and nickel prices continue to climb

Bloomberg reports that the prices of other necessary manufacturing materials, including cobalt and nickel, have also skyrocketed over the past year, “chowing into electric vehicle manufacturers’ margins at a crucial time in the development of booming industry.

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“With demand increasing, they now face a dilemma: swallow the extra costs or try to pass them on to consumers,” reports Bloomberg.

Indeed, S&P reports that the price of cobalt metal is up 70% year on year.

“Growing concern over lithium and other battery metals becoming the limiting factor in driving EV adoption has led automakers to increasingly engage upstream of the industry,” said said S&P.

General Motors announced in July 2021 that it had partnered with Controlled Thermal Resources’ Hell’s Kitchen lithium project in California to secure local, low-cost lithium.

“Batteries are and will remain one of the primary cost drivers for electric vehicles. Lithium is a key battery material used in the cathodes and electrolytes of GM electric vehicles like the Chevrolet Bolt EV and Bolt EUV. more prominent in battery use as GM explores lithium metal batteries with a protected anode,” GM said in a press release at the time, adding that most of the lithium used in lithium-ion batteries is currently mined and processed outside the United States.

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Stellantis has also recently – from November 2021 – partnered with Vulcan Resources, whose Zero Carbon Lithium Project (Upper Rhine Valley, Germany) uses geothermal energy to produce battery-grade lithium hydroxide at from brine “without the use of fossil fuels and minimal water consumption, reducing carbon generation in the battery metal supply chain,” according to a press release.

Volkswagen and Renault have also partnered with Vulcan, according to S&P.

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About the Author

Yael Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She has also worked as a VP/Senior Content Writer for major New York-based financial firms, including New York Life and MSCI. Yael is now independent and most recently co-authored the book “Blockchain for Medical Research: Accelerating Trust in Healthcare”, with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in journalism from New York University and one in Russian studies from Toulouse-Jean Jaurès University, France.

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