19 May 22

Raw material shortage can kick up EV battery costs by 22% by 2026

According to a new report, electric vehicle (EV) adoption goes up in almost all parts of the world each quarter, yet the raw material supply may not be enough to sustain this push forward from 2023. 

European Transport and Environment (T&E) made a relieving announcement for the EV makers at the beginning of May, stating that the global supplies of lithium and nickel are enough to produce 14 million EVs in 2023. 

A new report released by E Source says otherwise for the 2023-2026 period; battery prices may surge 22% in this period due to raw material supply shortage. According to E Source, the EV battery industry is not prepared to stand against the "tsunami of demand", which will also push the prices up. 

The EV industry has been enjoying reducing EV battery cell prices in recent years, which stand at $128 per kWh on average and are expected to fall to $110 per kWh next year. But, this picture will also overturn with the increasing prices, as battery cell prices may peak at $138 between 2023-2026. After the tsunami period, E Source expects the prices to plunge by around $90 per kWh. 

The surging prices will be led by the decreasing supplies of lithium, which also pushed the EV battery industry to develop next-generation technologies, such as lithium-iron batteries. 

EV sales will fall in 2026 

Global battery-electric vehicle (BEV) sales more than doubled in Q1 2022 compared to the same period of last year, with China representing all two BEV sales out of three, excessing the one million mark. 

All-electric car sales also surged in Europe by 53.4% compared to the same period last year, ending with BEVs grabbing 10% of the market, according to Acea. According to Automotive News, in the US, BEV sales increased 60% and reached 4.6% of the local market share. According to Research and Research, in China, BEV sales jumped 79.4% and penetrated 21.9% of the national auto market. 

These figures point out the oncoming tsunami, which will be aligned with the increasing EV prices and batteries. E Source predicts a price increase between $1,500-$3,000 per EV sold in 2026. Eventually, the EV sales in that year may fall between 5% and 10%. 

More mining needed

Statista expects 14,8 million units of EVs to be sold in 2026, more than two million of the sales to occur in the US, according to LMC Automotive. 

Ford CEO Jim Farley said the industry needs mining permitting and the collaboration of the private sector and the government in a statement to CNBC. Tesla CEO Elon Musk, on the other hand, urged the mining industry in 2020 to produce more nickel. 

Underlining the price increase of lithium by 900% in the last 18 months, E Source says the number of mining projects is deficient, while China is increasingly dominating the supply chain. Today, China operates 15 mining operations out of 17 in the Democratic Republic of Congo (DRC), according to the Australian Strategic Policy Institute (ASPI). The country supplied almost 70% of the world's cobalt in 2020, according to the US Geological Survey. 

The need for increased mining operations is also displayed by the cobalt consumption figures, as the automotive industry exceeded smartphones and personal computers for the first time in 2021. Figures released by the Cobalt Institute show that the automotive industry siphoned 34% of the market, with 59,000 tonnes. 

The concerns over mining operations have already triggered the development of new technologies, while major automakers are setting up new strategies for the coming years. In April, Honda and General Motors (GM) announced a partnership to produce affordable EVs with a price tag below $30,000 starting in 2027. The automakers will also focus their efforts on developing solid-state batteries (SSDs).

Image: Shutterstock

Authored by: Mufit Yilmaz Gokmen