Could Rising Battery Prices Slow Down the EV Revolution and Climate Change Efforts?
“Rising Battery Prices Add Uncertainty to Electric-Vehicle Costs”, “Rising Lithium Prices Could Stop The EV Revolution”, “Surging price of battery materials complicates carmakers’ electric plans”, “Rising Battery Costs Hit Carmakers, Threaten Climate-Change Push”. These are just some of the latest headlines to hit the industry. Considering the speed at which battery prices have been declining over the last few decades, it’s raising many questions for both battery manufacturers and the EV industry. Why is it happening? Will this trend continue? Is it concerning?
A Brief History of Battery Prices
Over the course of a decade, the price of a lithium-ion battery pack fell by 89% from more than $1,100/kWh in 2010 to $137/kWh in 2020. When the graph below was created in 2019, the price of an average battery pack was expected to be around $94/kWh by 2024 & $62/kWh by 2030. This positive prediction was aligned with the global effort for EV adoption, decarbonization and renewable energy storage.
Source: BloombergNEF, 2019
However, due to current events, raw material costs are increasing and price expectations are changing.
Supply chain disruptions, geopolitical conflicts and investor speculation have led to material shortages and rising metal prices, including spikes in lithium, cobalt and nickel costs.
While lithium carbonate prices peaked in 2018 to around $15,000 per ton, they dropped to half that price by the end of 2020. Meanwhile, lithium prices have more than doubled since the end of 2021, hitting over $25,000 per ton. Since September 2021, Chinese producers have raised their prices of lithium iron phosphate by up to 20%. By the end of March 2022, the cost of lithium reached over $50,000 per ton.
In the case of cobalt, the metal went from $30,000 per ton in 2020 to $80,000 in April 2022, is up 16% this year alone and its highest since June 2018. Furthermore, the cost of nickel surged so much, going from $20,000 in 2020 to topping $100,000 in early March 2022, that the London Metal Exchange temporarily suspended trading it. Indeed, as Russia is the world’s third largest supplier and the largest nickel producer, it has control of the price and availability of the metal. Though by the end of March, nickel had dropped back to $37,115 per ton, projections made before the conflict were expected to hit $32,500 by the end of 2023 and $38,835 only in December 2025.
Source: Bloomberg - “Nickel Turmoil Is Back as Prices Spike 15% Again to Hit Limit”, 2022
Rising Battery Price Trends
The $105/kWh average cost in 2021 was down almost 99% from over $7,500 in 1991
While battery prices have consistently declined in recent years, the rising prices of lithium, nickel, cobalt and other materials could stop and even reverse that trend. According to BloombergNEF’s 2021 Battery Price Survey, higher costs of raw materials could push the average price of a lithium-ion battery pack to $135/kWh in 2022, marking the first increase in prices since 2010, when the average cost was $1,200/kWh. Indeed, during the first quarter of 2022, the average cost of lithium-ion battery cells shot up to an estimated $160/kWh compared to $105/kWh from 2021. Moreover, it’s expected that between March and June 2022, global cell prices will go up by 20-30%.
Experts believe overall battery costs could stay elevated over the next year before dropping. This would be due to large investments by car manufacturers and suppliers in mining, refining and battery cell production as they attempt to diversify raw material sources and tip the scales from shortage to surplus. Additionally, business data company, IHS Markit, predicts that lithium-ion battery prices specifically will not fall until 2024 as a result of rising metal prices, increasing demand for EVs and China almost monopolizing the industry.
Impacts on the EV Industry
One of the main principles behind the belief that EVs will take over from internal combustion is the reduction of the cost of batteries. Indeed, in the price of a typical EV battery cell, just over half of it relates to the materials in the cathode and 12% to the graphite in the anode. In the case of typical NMC cells which use lithium, nickel and manganese, the rising costs of lithium and nickel will affect the final price of the battery. Furthermore, for EV battery packs in particular, cells account for approximately 80% of the total pack price. The change of battery prices, noted by BNEF, has put the EV industry on high alert. Automakers understand that more actions need to be taken to ensure a smooth and regular supply along with reasonable prices.
During Q4 2021, Ford Motor Co. and Renault SA had set battery pack price targets at $80/kWh by 2030, while Nissan sought to reduce the cost to $75/kWh by 2028. However, due to 2022 developments, these strategies might need to be accordingly adjusted.
While the car industry continues to transition from internal combustion engines to EVs and with EV demand constantly increasing, industry experts are concerned that production won’t be able to scale due to lithium and other mineral prices surging. Additionally, inflation could slow the transition from fossil fuels, as the cost of lithium-ion batteries increases and affects the mainstream adoption of EVs. Indeed, it could cost car manufacturers up to $8,000 more to make an EV battery pack by the end of 2022. As a result, Elon Musk described nickel as Tesla’s “biggest concern for scaling” and is the reason the company is moving to iron cathode tech. Similarly, China-based SVolt Energy Technology Co., which supplies Jeep-maker Stellantis NV, recently flagged issues with material shortages including copper foil. Moreover, one of Volkswagen AG’s partners, Gotion High-tech Co., told customers it would have to increase battery prices due to soaring commodities.
Therefore, car manufacturers have gone from focusing on battery performance to now worrying about battery supply issues. Consequently, they are now looking for improved supply and production, in addition to better-performing batteries. This includes companies and technologies that can solve these problems with improved manufacturing, AI-based and smarter production, cheaper battery materials, and new battery design – all of which can lower battery prices.
Keeping Battery Costs Down with Addionics
Car and battery manufacturers have to find different ways to keep costs down and advanced battery design is one of the innovative approaches the industry is starting to adopt in an effort to create better performing and cheaper batteries. Addionics is leading this approach with the mission of creating the best battery architecture on the market. The company has developed an AI-based, proprietary manufacturing process to produce Smart 3D Electrodes. The patent-protected, scalable and cost-effective manufacturing process enables the integration of new battery design into any battery in the world regardless of its chemistry. The solution is chemistry agnostic, giving it the potential to have an important impact on the global effort for decarbonization, mainly by focusing on EV batteries and electrification.
In addition to this, with rising commodity prices and supply chain issues, the threat of increased battery prices and its impact on the fight against climate change are concerning. Addionics technology keeps costs down by using a highly efficient and advanced manufacturing process which uses less metal and binders, as well as less layers in each battery. Indeed, these production capabilities help maintain prices and have the potential to even reduce them.