The electric car has a very complicated future if its worst problem is not tackled
Lithium carbonate, one of the essential materials for manufacturing electric car batteries today, continues the frantic price escalation with which 2020 began. Surpassing all predictions , it has already cost 900% of what it cost just two years ago , and it doesn’t look like it’s going to peak yet . Unlike what happens with other raw materials such as cobalt or nickel, the problem with lithium is not its scarcity… but the difficulties its production and refining are experiencing (which are carried out mainly in China ). In 2020, the ton was paid at $6,800, but two years later, it is already close to $80,000 . If we add to this circumstance factors such as increasing demand from car manufacturers in full transition to electric cars and the context of the global crisis, we have as a result an increasing price of batteries, and therefore, the price end of the car too .
How the price of lithium affects the final price of an electric car
Where are lithium ion batteries made?
79% in China
8% Asia
7% Europe
5% USA
The 10 year trajectory has started to shift towards more #EV battery capacity in Us and Europe, but not by much According to data published by the CEO of Benchmark Mineral Intelligence (the largest price reporting agency regulated by the International Organization of Securities Commissions, specializing in the lithium supply chain), Simon Moores, almost 80% of lithium batteries from all over the world have been made in China for a decade. Meanwhile, importing a critical raw material from China at times of great tension in the supply chain such as those we are currently experiencing has a direct impact on its price and makes manufacturers very dependent. Lithium is present in small amounts both in the anodes and in the cathodes of the cells that make up the battery, although the cost of this and other raw materials is equivalent to more than 80% of the final cost of a lithium-ion battery the cathode the most expensive part. As the Benchmark graph shows with the percentages of price variation in the raw materials necessary for batteries from 2020 to now, the variation in lithium is brutal.
The perfect storm and endless?
The fall in EV sales in the second half of 2019 in China (the largest market for EVs), and a global reduction in sales caused by the COVID-19 pandemic slowed the growth of lithium demand , which affected demand for both batteries and industrial applications. However, currently long-term scenarios show strong growth in lithium demand over the next decade: electric sales in China show signs of recovery since last June, and according to experts, demand for lithium-ion batteries is on track to grow 36% this year to 610 GWh.
Moores went so far as to say on his Twitter that “if the manufacturers do not manage to control this soon… the prices of raw materials will continue to rise”, since the CEO considers that extractions without active mines are not enough , and more taking into account that each lithium mine can take 7-10 years to come online. According to Benchmark, there is very little additional lithium production capacity before late 2023 and early 2024, and many projects are being delayed by the unprecedented drought in China. In the longer term, and according to estimates , the lithium market is likely to become more balanced around 2026, finally pushing prices to more stable levels. Thus, the industry is facing a decade of necessary and urgent changes: not only are more producing regions needed to meet demand and overcome the structural limitations facing the industry.