Tesla and other EV makers could see higher prices for battery materials in 2022

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Tesla recently made history by being the first automaker to hit a market cap of over $1 trillion. This all but proved that the electric vehicle transition is here, and EVs are here to stay. With the automotive industry seemingly now waking up to the notion that a shift to electric cars is inevitable, however, a shift in the battery industry seems to be happening. 

Batteries for electric vehicles are now seeing a price hike in China, with the cost of raw materials such as lithium seeing a substantial increase in price. With this trend in mind, industry research group Benchmark Mineral Intelligence (BMI) noted in a recent report that electric vehicles may face rising battery costs in the coming year. 

What is interesting is that the price hike of battery materials is happening while the industry is becoming more and more prolific. Expectations for electric car batteries have long pointed to the idea that high-performance batteries should decrease in price over time as economies of scale accompany an expanding EV market. And in previous years, this has generally been the case. As per BMI chief executive Simon Moores, however, the price hikes for raw materials in China could end up raising battery prices instead. 

Moores noted that if Korean and Japanese battery makers such as LG and Panasonic follow China’s lead, the price of batteries using nickel, cobalt, and manganese cathodes could rise to about $115 per kWh next year. The BMI chief executive noted that this year, nickel, cobalt, and manganese cathodes are already at $105 per kWh. “The market may have to reposition itself for a period of rising battery cell prices, a new phenomenon for an industry conditioned to expect year-on-year falls,” Moores stated

In a way, the rising prices of battery raw materials from China could be seen as a response to strong demand. As stronger than expected demand outstripped supply in China, for example, Benchmark Mineral Intelligence found that the price of lithium carbonate jumped by over 300% over the past year to $28,675 per tonne as of mid-October. Other raw materials such as nickel sulfate and cobalt hydroxide have also seen steep price increases this year. 

The apparent rising costs in battery materials could prove to be a challenge for automakers that are looking to ramp their electric vehicle business next year. The coming year would likely see numerous prolific electric cars being launched and ramped, such as the Ford F-150 Lightning, the Rivian R1S, and the Tesla Cybertruck. It would then be interesting how each respective automaker responds to rising battery costs. Tesla is already putting in a lot of effort to secure key materials for its vehicles’ batteries through independent deals with mining companies across the globe. One can only hope that other EV makers are doing the same. 

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Tesla and other EV makers could see higher prices for battery materials in 2022
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