Ukraine invasion is leading to various oil prices increasing, so are the prices of essential metals that are used to make electric vehicles. Tesla being a top player in the EV industry, aimed to make affordable EVs, which now seemed to be a far-fetched idea. Elon Musk envisioned that they will be able to roll out more affordable vehicles. However, the goal seems to have setbacks as the market is changing during the ongoing war.
Rising prices of nickel, lithium, and other materials threaten to slow and even temporarily reverse the long-term trend of falling costs of batteries, the most expensive part of EVs, hampering the broader adoption of the technology, said Gregory Miller, an analyst at industry forecaster Benchmark Mineral Intelligence. And that is on top of a supply chain already snarled by the COVID-19 pandemic and the global chip shortage.
“Rising raw material prices certainly have the potential to delay the timeline on cost parity between EV and ICE vehicles, which could hamper the wider adoption of EVs,” Miller said, referring to internal-combustion engine vehicles that dominate the market. This year could mark the first year-over-year increase in the average price of lithium-ion battery cells, he said.
Rising stakes
The conflict in Ukraine has only raised the stakes, pushing nickel and aluminum prices to record highs on Monday on growing fears exports from leading producer Russia could be disrupted. Lithium prices also have increased, more than doubling since year-end, as supply fell short of rising demand.
Russia’s largest miner Nornickel produces around 20% of the world’s supplies of high purity class 1 nickel, which is used in EV batteries, according to Benchmark Mineral Intelligence. Russia is also a large provider of aluminum, used in batteries. To be sure, oil prices, which jumped to the highest levels since 2008 on Monday, could serve as a counterbalance, spurring greater interest in EVs after years of growing demand for gas-guzzling sport utility vehicles and pickup trucks. Rising EV prices – marked by hikes over the past year by Tesla and startup Rivian Automotive matter because mainstream consumers are not going to pay a massive premium for a technology that many do not yet fully embrace.
The average EV sold for almost $63,000 in January in the United States, about 35% higher than the overall industry average for all vehicles of just over $46,000, according to research firm Cox Automotive. While consumers worry less now about being stranded without power on the roadside, the price remains a major concern, according to a Cox survey.
Credits- Reuters
