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Electric Automakers Must Brace for Rising Battery Materials Costs in 2021

As the demand for electric vehicles increases, the production capacity of vehicles’ batteries cannot be increased simultaneously, leading to an upward trend in the price of electric vehicle batteries in the next few years.

– In China.

New Energy Vehicle Industry Development Plan (2021-2035)
New development plan for NEVs unveiled
  • According to the “New Energy Vehicle Industry Development Plan (2021-2035)” issued by the General Office of the State Council of China recently:
    • By 2025, the sales of new pure-electric passenger vehicles will reach about 20% of the total sales of new vehicles.
    • By 2035, pure electric vehicles will become the mainstream of newly sold vehicles.
    • In the next 10 years, China’s new energy vehicles will reach 30-50% of the total vehicle ownership.

– In European Union.

  • The current sales scale of electric vehicles in Europe is about 1.4 million. According to a draft document from Reuters, the EU’s goal is to have at least 30 million zero-row electric vehicles running on its roads by 2030.

– The United States, Japan, South Korea and other countries are also actively developing and expanding the number of new energy vehicles.

It is estimated that in 2022, the global demand for car batteries will grow at a rate of 13% per year, reaching 54.1 billion U.S. dollars, accounting for 38% of total sales. …It is estimated that by 2022, the demand for vehicle batteries in the world will grow at a rate of 9.8% percent, reaching US$141 billion. The increase in demand for electric vehicle batteries will cause the price of main materials to soar. This, in turn, will increase battery prices by about 18% and as batteries account for about 20% to 40% of car costs, which will affect the total profits of electric car manufacturers.

electric vehicle batteries
electric vehicle batteries

There are several important raw materials in batteries, namely lithium, cobalt, and nickel. Since the beginning of 2021, the prices of the three main natural resources have been rising. The cost of lithium has more than doubled. The price of cobalt will also double, while the price of nickel will increase by 60%.

If the price of nickel reaches a historical high of US$50,000 per ton, the price of each electric car may increase by US$1,250 to US$1,500.

According to a report by China’s Central Radio and Television Economics, the global commodity market has once again been affected by emergencies. The Chile government decided to close the border from April 5 to May 1 local time to strengthen the prevention and control of the epidemic. As Chile is the world’s second-largest supplier of lithium raw materials, according to agency analysis, the price of lithium may see a new round of rising cycles.

Chile closes borders for April
Chile closes borders for April

The Chilean government decided to close the Chilean border from April 5th to May 1st, suspend the entry of general foreign tourists into Chile, and exit the country only for emergencies, humanitarian reasons, or medical purposes. Chile is a major mineral country in the world, and the border closure has aroused great concern in the commodity market. Although the Chilean Ministry of Energy and Mining responded that the border closure will not affect the normal operation of mining companies, we believe that the local export of copper, lithium, and other minerals will definitely be affected.

Copper price surges after Chile closes its borders
Copper price surges after Chile closes its borders(https://www.mining.com/copper-price-jumps-as-chile-close-its-borders/)

From the perspective of Chile’s border closure, it will inevitably have a certain impact on lithium exports. Chile is the world’s second-largest producer of lithium, and its supply of lithium accounts for about a quarter of the world. Chile’s border closure will cause delays in shipping schedules, or exacerbate the shortage of lithium materials from May to June.

The uses of lithium are well known. Lithium carbonate is one of the core raw materials for various types of lithium batteries. In recent years, lithium has shown low supply growth and low inventory characteristics. The contradiction between the supply and demand of lithium products is more prominent. Currently, The world is ushering in the upsurge of lithium battery development. Take China as an example: In the first quarter alone, many power battery companies announced more than 20 new power battery projects with an annual production capacity of more than 350GWh. But upstream, no new lithium mines have been put into production. In 2021, the overall new production capacity of lithium is basically not there, and there will be new production capacity in 2022, and the new supply may only be the increase in the utilization rate of some existing mines and salt lakes. So at present, the overall market for lithium is hard to find. The downstream side can afford to pay, but cannot buy the goods.

Since the fourth quarter of 2020, global commodity prices have risen rapidly, and lithium prices have been in the forefront, especially lithium product prices have doubled in a short period of time. Since March 2021, the price of non-ferrous metal-related products has entered a state of high volatility and adjustment, while the price of lithium has not undergone a deep correction. Under the influence of news such as Chile’s border closure, lithium prices may see a new round of rising cycles. Affected by factors such as carbon neutrality, non-ferrous metal products such as lithium will play an extremely important role in green development and energy storage in the future, which will also lay the foundation for future price increases.

On the one hand, there is an increase in demand for car batteries, on the other hand, there is pressure on rising battery raw materials prices. How to break this deadlock is very important, because this will affect all users of electric vehicles in the future. As a battery practitioner, I think from two aspects, firstly, to explore and mine more raw materials, and secondly, to make changes in battery raw materials.

Carl Zhang

Carl Zhang

I am a senior sales with 15 years in the battery industry and a bachelor's degree in economics.
I will be sharing some of my expertise on batteries and my insights into the battery industry in my blog, which should help you with your purchases in China.

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