Consumers around the world are still lining up to buy EVs even as vehicle prices soar, upending a 15-year-old perception in the auto industry that EV sales will only explode once battery costs drop to a certain level.
This year, consumer demand for electric vehicles remains strong, even as the cost of lithium-ion battery cells has soared from $105/kWh last year to $160 kWh in the first quarter. Reasons for higher costs include supply chain disruptions, sanctions on Russian metals and investor speculation.
For a small car like the Wuling Hongguang Mini, the cost of the battery increases by $1,500, or 30 percent of the vehicle's selling price. But petrol and diesel costs have also risen sharply since the outbreak of the Russia-Ukraine conflict, and experts say environmental concerns are pushing more buyers to electrify electric vehicles despite volatile economic conditions.
Almost all electric vehicle makers, from Tesla to SAIC-GM-Wuling, have passed the cost on to consumers, and the price of electric vehicles has increased by more than 10%, and the price of electric vehicles is likely to rise further in the future. Andy Palmer, chairman of Slovakian electric vehicle battery maker InoBat, said profits in the battery industry were already thin, so "the increased costs will have to be passed on to carmakers".
For car companies, if raw material prices continue to rise, they are likely to pass on the increased costs to consumers. "We need to maintain profit margins," said Markus Schaefer, Mercedes-Benz's chief technology officer.
While prices have risen, EV consumers have not been deterred so far. EV-volumes.com estimates that global electric vehicle sales surged nearly 120% in the first quarter. Chinese companies NIO, Xpeng and Ideal all set records for electric vehicle sales in March. Tesla also delivered a record 310,000 electric vehicles in the first quarter.
Venkat Srinivasan, director of the U.S. government's Argonne National Laboratory Collaborative Energy Storage Science Center in Chicago, said: "We seem to have reached a tipping point that is completely different from what we have been before, and that is the emotional or psychological tipping point of consumers. More and more People are starting to buy electric vehicles, despite the high cost of batteries and vehicles."
Rising battery costs may only be a temporary phenomenon, as technological improvements and higher production volumes have been driving down costs over the past 30 years. Industry figures show that batteries will cost $105/kWh in 2021, up from $7,500/kWh in 1991.
Experts expect battery prices to remain high next year, but as automakers and suppliers invest in mining, refining and battery production, as well as diversify their sources of raw materials, shifting supply from shortages to surpluses, battery costs are likely to rise. Another big drop. "It's a bubble, and for it to stabilize, at least until the end of 2023," said Prabhakar Patil, a former LG Chem executive.
British battery maker Britishvolt will start battery production in England in 2024, with the new plant reaching a capacity of 45 GWh. Isobel Sheldon, the company's chief strategy officer, said the advice they were getting from raw material suppliers was: "Don't set pricing now, wait 12 months and set prices then, because then everything will be in a more balanced state. "
The industry has been waiting for battery costs to drop below $100/kWh for a long time, which is believed to be an important signal that EVs will be on the same level as ICE vehicles. But analysts point out that battery costs may not matter as much as gasoline prices soar and consumer preferences change.
Stan Whittingham, co-inventor of lithium batteries and a 2019 Nobel laureate, said demand for electric vehicles in China and other markets is "faster than people think, and faster than the supply of materials for electric vehicle batteries."
Chris Burns, chief executive of battery materials supplier Novonix, said concerns about the environment and climate are also driving consumers, especially younger ones, to electrify electric vehicles and ditch fossil fuel-burning vehicles. He said: “Many young people entering the market are making buying decisions that go beyond simple economics and they are willing to drive an electric car because it is kinder to the planet. They are making that decision even if the price of a petrol car is more expensive. Low."
