Commodities boom drives up the price of EV batteries
Total battery costs for electric vehicles (EVs) have more than doubled since the start of the year, according to Rystad Energy (Rystad).
The estimates are based on its analysis of spot pricing, which suggest the price of batteries has spiked from $60 to $130 per kilowatt hour (kwh) – around $9,000 per battery.
This follows lithium prices rocketing 118 per cent since January, while cobalt, nickel and aluminium have also enjoyed historic rallies.
Commodities have boomed amid fears of supply disruption following Russia’s invasion of Ukraine, alongside rebounding post-pandemic demand as restrictions ease across developed economies.
Typically, vehicle manufacturers have long-term commodity agreements, acquiring materials in deals that run over multiple years.
However with prices expected to remain elevated over the medium term, it is highly likely these raw prices will impact future agreements.
Daniel Clarke, analyst at Global Data, told Morning Wire that high lithium prices are here to stay amid volatile market conditions.
He said: “This will have significant long-term implications for the sales, cost, and production of EVs. Automakers will have to choose whether to absorb the cost of the rising battery metals or pass it onto the consumer.”
The analyst argued that prices for EVs could generally increase, as not all vehicle makers will be able to pass on costs.
He also suggested it will be incumbent on manufacturers to have well ordered supply chains for key materials in a volatile market.
Otherwise, production could be severely disrupted, either due to cost difficulties or metal shortages.
EVs have broken into the mainstream in recent months, with the vehicles now representing 18 per cent of total car sales, according to the latest data from Close Brothers Motor Finance.