October 7, 2022

It shouldn’t have been like this.

Electric-vehicle battery costs will likely rise for the first time this year, rather than the steady decline they’ve seen for more than a decade.

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And EV buyers are seeing results: many auto makers, from newcomers like Rivian Automotive Inc. RIVN,
Tesla Inc. For established players like TSLA,
EV prices have increased. The move has affected all models, from massive electric sedans to iconic muscle cars with deep order books, and even Ford Motor Company’s F.
The EV version of the F-150 pickup truck, the vehicle that has reigned supreme as the best-selling vehicle in America for decades.

Supply-chain malfunctions and shortages have kept auto prices high and inventory depleted for the better part of two years. For EVs, however, there’s another layer of complexity, as manufacturers are scrambling to secure the lithium and other metals used in the production of EV batteries in a renewed push to make them mainstream. .

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“Prices are definitely rising and the cost of the metals that go into batteries has increased dramatically,” said Michelle Krebs, an analyst at Cox Automotive.

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

Edmunds collects the prices of vehicles sold through dealerships, so Tesla EVs are not included in those calculations because it sells its cars directly to consumers.

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Analysts at Edmunds estimated the average EV price to be around $65,000, which includes Teslas. Rivian EVs are also not in the estimates due to their still low volume.

1 barrier to mass EV adoption, Krebs said, “while other barriers, such as range and charging concerns, have become a concern for drivers.”

With prices of lithium compounds and other metals used in batteries rising by triple-digit amounts, Tesla plans to enter the lithium refining business.

The Energy Department said in a recent note that China, the largest global EV market, “dominates the supply chain for the manufacture of lithium-ion batteries,” which includes processing minerals and raw materials.

The US “depends on international markets for processing most lithium-battery raw materials,” it said in a report outlining policy steps to move out of that dependence.

Yayoi Seiken, head of energy storage at BNEF, said lithium-iron phosphate battery-cell costs are up 84% relative to May 2021 and peaked at $153 kWh in March.

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Those prices are based on an average of spot prices of raw materials, and actual prices could be lower as many battery makers and auto makers have supply agreements to smooth out volatility, she said.

Battery cost is the lion’s share of EV cost, accounting for about 30% to 50% of a passenger EV as the share varies by vehicle model and range.

There seems to be some relief this year.

“The supply-demand balance for all battery metals, lithium, cobalt, nickel, aluminum is tight for 2022,” Seken said. “Lithium carbonate costs have been the most influential on battery prices, and BNEF expects prices to increase for the rest of 2022 and 2023.”

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Mining capacity is expected to increase over the next year and into 2024 following industry investments, but “if additional mining supplies do not ramp up, the industry could be constrained in the long term,” Seken said.

General Motors Company GM,
Last week Chevrolet unveiled the Equinox compact electric SUV, promising it would cost around $30,000, a bit more than the Chevy Bolt, but offering a body style that’s been popular in America for decades.

However, there will be a wait, as some models of the EV are expected to enter production in 2023 and expand to the full lineup by 2024.

Cox Automotive’s Krebs said EV buyers are at the top of the income bracket, and expensive vehicles like the Rivian and Ford electric pickup trucks have order books that are likely to be “very heavy for quite a while.”

He said that demand is not an issue and consumers will get to see cheaper options.

A Tipping Point?

Venkat Srinivasan, director of Argonne National Lab’s Collaborative Center for Energy Storage Science, sees an important point for EVs.

“We’re still scratching the surface as EV market share continues to grow,” but there are two important changes, he said.

“People are looking at EVs as an option. They are seeing more of them on the street. They are seeing their neighbors buying EVs, so familiar,” said Srinivasan. “They’re also seeing that we have to do something about the climate emergency.”

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

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Furthermore, the monthly national EV market share has remained above 5% since May of 2022. Wall Street expects market share to increase significantly thanks to California’s recent move to ban the sale of new gas-powered vehicles by 2035.

Srinivasan said the supply chain of batteries is trying to meet the growing demand and it takes time to build that chain.

Innovation in battery composition is underway. Tesla said in October 2021 that it was moving to cobalt-free battery chemistry for all of its Standard-class vehicles, rather than just an option for some Model 3 trims.

So the move toward using less cobalt is here “as we speak,” Srinivasan said. Efforts to use less nickel could take a few years, and the use of silicon for battery anodes is emerging as a “promising” option, he said.

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

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

Srinivasan said the batteries, which cost around $65 per kilowatt hour, are likely to power cars that most people will be able to afford.