Due to Rising Battery Material Prices

Automakers’ plans to halve EV prices are failing due to rising battery material prices.

Automakers’ plans to halve EV prices are failing. Paradoxically, this is because their EV sales volumes are rising fast. The rising volumes have led to rising battery material prices, and their room for price cut is decreasing.

The price of lithium surged 91.4 percent from Jan. 1 to July 23 this year, when the prices of cobalt, copper and aluminum jumped 63.1 percent, 30.3 percent and 25.5 percent, respectively. The cost of six metals used in a 64 kWh battery cell increased from 1.49 million won to 2.27 million won from January last year to this month.

The rise in raw material prices is because of a surging EV demand. Last month, a total of 592,400 EVs were sold worldwide, up 144 percent from a year ago. This year’s EV sales volume is estimated at 6.1 million units, up 187 percent from a year earlier.

According to experts, the rise in raw material prices is likely to lead to more expensive EVs by more than offsetting the effect of economy of scale based on battery production line expansion. The battery of an EV accounts for 30 percent to 40 percent of its price and key battery materials such as lithium and cobalt account for 30 percent to 45 percent of the price of the battery. In short, more expensive battery materials cannot but result in more expensive EVs. “The global EV battery supply is likely to become insufficient again in 2025 and the shortage is likely to be exacerbated in 2026 to 2030,” one of them pointed out.

Needless to say, the most urgent issue for EV and battery manufacturers is raw material procurement. They are striving to reduce their reliance on China, which is dominating the global mineral markets. For instance, Tesla recently signed its third nickel purchase contract in eight months with BHP, the largest mining company in the world. Last month, LG Energy Solution acquired 7.5 percent of Australian nickel and cobalt producer QPM by investing 12 billion won. SK Innovation signed a contract with Glencore, the largest cobalt supplier in the world, to purchase 30,000 tons of cobalt for four years to come.

In addition, automakers are working on how to minimize the use of Chinese rare-earth elements in permanent magnets in their EVs. Nissan, Tesla and so on are currently working on cobalt-free batteries and Hyundai Motor Group is developing all-solid-state battery technologies on its own while considering introducing battery rental programs.

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