“The tsunami of demand is coming. I don’t think the battery industry is ready.” The reflection is from Sam Jaffe, director of the research firm E Source, and speak with data in hand. According to a recent study of the organization of him, picked up by CNBCthe sector will face in the medium term an escalation in costs manufacturing electric vehicles. The reason: the scarcity of essential raw materials for battery cells.
The data from E Source is clear. After years with a decrease in the price of battery cells, a trend favored by the increase in production, their cost will suffer a rebound until after the middle of the decade. Today it calculates that they cost an average of 128 dollars per kilowatt-hour, a value that could still drop to 110 by 2023. From there, E Source predicts that between 2023 and 2026 prices will experience a 22% rise to reach at a maximum of 138 dollars.
Its researchers also predict that this increase in production costs will be transferred to the price of electric vehicles (EVs) themselves. In particular, he believes that it could translate into about 1,500 or 3,000 dollars more in cars sold in 2026. E Source has also lowered its sales projections for that timeframe by around 5-10%.
“There is a shortage and there will be more”
What is the reason for the rise in costs? The key is the growing demand for critical raw materials such as lithium. “There is a shortage and there will be more”Jaffe acknowledges.
The lack of the resource explains that the price of lithium has quintupled in a matter of a year or that manufacturers have begun to consider measures to guarantee their supplies.
Tesla has already pointed out that if the price does not fall, it will start mining it directly. He considered that possibility in 2020 and has done it again last month. Volkswagen, General Motors o BMW They have also made a move, supporting lithium extractions in different parts of the globe. Another strategy is the commitment to solid-state batteries, which would reduce dependency.
The E Source forecast contemplates that beyond 2026, when a ceiling of 138 dollars per kWh is reached, prices record a fall again constant during the following years. In 2031 they calculate in fact that a minimum of 90 dollars will be reached. The firm does not clarify the reasons for its forecast, but it does slip some important clues, such as the possibility of an increase in extraction projects as the price continues to climb.
“With the price of lithium rising almost 900% in the last eighteen months, we assume that the capital markets will open the doors to establish dozens of new lithium mining projects. Instead, investments have come in trickle and most come from China for the Chinese supply chain,” explain the report produced by E Source, based in the US.
Another factor is reuse itself as there are more batteries. “Recycled lithium-ion cells are less expensive than newly manufactured ones and will start to substantially affect the supply chain around 2027,” think about your experts: “We expect reused lithium-ion cells to account for 11% of the supply chain by 2030.”
Cover Image | Bob Osias (Unsplash)
