Could rising lithium prices stop the electric car revolution?

Rising price of lithium and other current minerals used in electric vehicle batteries is a concern

One of the guiding principles of the belief that electric vehicles will replace internal combustion is the falling cost of batteries. From a package of around US$ 1,200 (R$ 5,600) per kWh in 2010, prices have dropped to US$ 137 (R$ 643.9) per kWh in 2020 and US$ 132 (R$ 620.4) per kWh in 2021.

Costs were expected below $100 by 2023, at which point EVs would reach price parity with internal combustion vehicles and the game would be over for oil and gas. But the global rise in lithium prices has led some to question whether that dream would really come true.

Lithium carbonate prices were falling from a 2018 peak of around $15,000 a ton to half that price by the end of 2020, according to the Edison Group. But largely due to demand for EVs, the price has been growing throughout 2021, reaching over US$25,000 per ton by the end of last year and now reaching over US$25,000 per ton. $ 40 thousand (R$ 188 thousand) per ton.

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This sounds like a dire situation because demand for EV is only increasing and some are saying production cannot scale because lithium prices will prevent it, along with rising prices for other minerals. According to Trading Economics, cobalt has gone from US$30,000 in 2020 to US$80,000 per ton today, and nickel has climbed even further, relatively speaking, from US$376,000. $20,000 (R$94,000) to $80,000 (R$376,000) per ton.

This doubling and tripling of prices for key elements in lithium-ion batteries seems almost terminal to the price reductions and volume growth we’ve seen over the last couple of years. However, there are some other factors to take into account. First, while these elements are expensive, one must consider how much of each actually goes into an EV battery and the overall price of the vehicle.

As already mentioned, the costs of nickel and cobalt have exploded along with lithium, but manganese has not increased in price all that much. Graphite prices have also risen a bit recently, but not in the same multiples as cathode minerals.

Overall, though, most minerals that make up about half the price of a lithium-ion battery cell have increased greatly in cost, which could, in theory, even triple the price per kWh of electric vehicle batteries.

However, while there have been some EV cost increases, for example with Tesla raising its Model 3 prices in the UK, there has been no significant inflation from other manufacturers, other than that brought on by universal chip shortages.

If the 2021 package price was $132 per kWh, even the monster 100 kWh batteries in the highest-end luxury vehicles should only cost around $13,000. thousand), but in reality there is a huge profit margin that can soften the blow for the end customer.

As Michael Liebreich of Bloomberg NEF and Liebreich Associates pointed out in a tweet, we’ve seen this before with silicon. A big spike in silicon prices in 2008 led some to argue that solar panels wouldn’t scale, but a year later prices dropped again and continued at that low. Solar panels are now less than a third of the price they were per Watt in 2010.

The high prices of EV battery minerals should also be a blip. There’s nothing like a high price for the mineral to encourage more production as miners look to profit. Lithium is being described as “white gold” and there are numerous startups looking to tap into reserves, which are quite plentiful.

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In the UK, there’s Cornish lithium and British lithium, and in Germany, Vulcan Energy is looking to blast a huge brine lake in the Upper Rhine Valley. There are numerous startups in the US looking to explore lithium, such as Austin-based EnergyX and Bill Gates-backed Mangrove Lithium.

Technological development in battery chemistry will also be an important factor. If some minerals are too expensive, the battery chemistry may change. NMC anodes are not the only choice – there are also lithium titanate, lithium cobalt oxide and lithium manganese oxide.

Tesla switched to using Lithium Iron Phosphate (LFP) CATL batteries for the base Model 3 currently on sale in Europe, something I predicted in July 2020. I also recently reported on Theion’s radical sulfur-based battery design, which does not use nickel, manganese or cobalt, but still requires lithium. Theion is also not the only company researching lithium-sulfur, because sulfur is relatively cheap and abundant, giving it considerable cost advantages.

The rising price of lithium and other current minerals used in electric vehicle batteries is a concern. But we’ve seen it before, many times. Just as the switch to EVs is part of the solution to the problem of CO2 emissions and climate change, technological innovation will find a way into electric vehicle batteries, as it has always done in other areas.

The smooth curve of battery prices relative to EV and internal combustion vehicle price parity may have hit a speed bump, but the general direction of travel remains the same.