By Lifewire, Sascha Brodsky. Fact checked by Jerri Ledford.
- The cost of the batteries used in electric vehicles is rising.
- The price hike is due to the rising cost of all battery metals, including lithium, nickel, and cobalt.
- Experts say that EVs can still be a good deal compared to gas guzzlers.
Expect to pay more for your next electric vehicle (EV), thanks to the rising cost of batteries.
The average cost of lithium-ion battery cells increased to an estimated $160 per kilowatt-hour in the first quarter of this year from $105 last year. But experts are optimistic that electric cars won’t lose their appeal.
“Battery costs have been steadily declining for ten years, and this recent spike in commodity prices is driven by transitory macro events that extend well beyond electric vehicles,” Trent Mell, the CEO of Electra Battery Materials Corporation, told Lifewire in an email interview. “Users and consumers will continue to buy EVs. Even with recent developments, very few have changed their minds about switching to an electric vehicle.”
The costs of EV batteries are increasing because the price of all battery metals, including lithium, nickel, and cobalt, have been rising, Mell said.
“As we’ve seen across a spectrum of goods and supply chains over the past few months, those materials have seen a spike in cost due to a number of recent market and geopolitical developments,” he added. “And while the cost of batteries has indeed increased, it’s important for consumers also to remember that oil and gas prices have also sharply risen—while electricity costs have largely stayed flat. This is a crucial detail for all to keep on their radars as the EV space continues to grow, even amidst these rising prices.”
Peter Cowan, a director at EV battery recycling company Gigamine, predicted that the problem of scarcity is not going to go away. In an email interview, he told Lifewire that the problem is that the minerals and metals used to build these batteries are in very low supply, and demand is increasing.
“This is made worse by geopolitical problems hurting supply chains: Ukraine produces 2 percent of the world’s crude steel output and is the world’s third-largest exporter of iron and steel,” Cowan added. “It also exports significant amounts of manganese, which the war will have disrupted.”
EVs Still in Demand
Despite the rising battery prices, users continue to purchase electric vehicles in record numbers. Ryan Melsert, a former Tesla engineer and the current CEO of American Battery Technology Company, told Lifewire via email that increased consumer demand for EVs combined with battery metal scarcity may mean lower inventories, longer production delays, and less room for price negotiations than previously. He said that developing a sustainable, domestic battery metals supply chain is critical for fulfilling the potential that EVs can provide.
“Less than 1 percent of the global manufacturing capacity of each of the primary battery metals (lithium, nickel, cobalt, and manganese) is currently within the US,” Melsert added. “The largest EV battery manufacturers are located in Asia, with 80 percent of all battery cell manufacturing occurring in China.”
You might not want to hold off on your next electric car purchase as prices aren’t heading down anytime soon, predicted Srinath Narayanan, the CEO of Project Energy Reimagined Acquisition Corp, which buys electric car companies, in an email interview. He said that pricing for EV automotive will increase in the short to medium term as the industry will face a supply squeeze similar to the semiconductor industry.
“In the medium-term, government policies, incentives, and aggressive mining may alleviate the supply chain,” Narayanan added.
With long waitlists for new EVs, many people are turning to used EVs, Scott Case, the CEO of Recurrent, a company that analyzes the battery health of used EVs, said in an email interview. He said about 50,000 used EVs were sold in the first quarter of this year versus 150,000 new EV sales. “Put another way, if all used electric vehicles were a single make, they’d be the second most popular make in sales, behind Tesla’s new sales,” Case said.
And despite the ballooning costs of batteries, EVs can be a good deal compared to gas guzzlers, Case said.
“The relentless march towards upfront price parity between EVs and combustion engine cars has paused for a year or so, but the math on the total cost of ownership has shifted even more in favor of EVs with skyrocketing gas prices,” Case said. “It’s very difficult to unsee $6 a gallon plus gas prices when it comes to buying your next vehicle.”