Electric Vehicle Battery Prices Go Up Facing Lithium Shortages and Rising Demand

Workers at a factory for Xinwangda Electric Vehicle Battery Co. Ltd, which makes lithium batteries for electric cars and other uses, in Nanjing in China's eastern Jiangsu Province on March 12, 2021. (STR/AFP via Getty Images)

Electric vehicle battery prices are increasing as the cost of raw materials, especially lithium, is rebounding after a decade of price reductions following a radical growth in the electrification of vehicles by major manufacturers and subsequent hike in demand.

The biggest battery manufacturer in the world is China, where the benchmark price of lithium carbonate was 261,500 yuan (just over $41,060) a ton by the end of last year, an increase of more than five times from January 2021. The persistent climb is expected to subvert plans of automakers worldwide, many of whom are laying the groundwork for launching their fleets of electric vehicles and other related projects.

Cobalt, which makes up almost a fifth of the weight of the cathode in a lithium-ion battery, has doubled in price from last January to $70,208 a ton. According to the energy department, cobalt is considered the biggest supply chain risk for electric vehicle (EV) manufacturers. There are about 44 pounds of cobalt in every 100 kilowatt-hours (kWh) battery pack.

The price of nickel, which is used in some electric vehicle batteries, has increased by 15 percent to $20,045.

Supply chain shortages have resulted in product shortages worldwide that have affected prices, including that of battery components. Carmakers are struggling to get their hands on lithium, semiconductor chips, copper, and aluminum. Experts claim that lithium will be harder to obtain as additional investments are needed for mining and producing the necessary amounts.

New mining infrastructure takes time to set up and the production capacity of existing facilities is relatively low as the raw material is located deep in the earth’s core.

According to BloombergNEF’s 2021 Battery Price Survey, lithium-ion batteries will cost $135 per kWh this year, compared to $132 in 2021. This is not a drastic change, but it is the first price increase in 10 years. Back in 2010, it was $1,200 per kWh, and over the years, manufacturers have improved technology, prices have steadily decreased, and batteries along with EVs were made more affordable.

While the supply of lithium carbonate was an estimated 497,000 metric tons (mt) in 2021, it’s predicted to reach 636,000 mt this year, but according to S&P Global Market Intelligence, demand will be around 641,000 mt.

“Due to its strategic significance, lithium resources will be more difficult to obtain and control. Therefore, lithium resources will become a key factor restricting the development of the industry in the medium- and long-term,” a spokesperson for Tianqi Lithium, a Chinese mining company, told S&P Global Platts.

Australian lithium mines shut down because of the drastic decrease in prices over the years, and attempts to revive the industry have been mired by pandemic-related staffing issues.

Chinese companies have been hit with power shortages and COVID-19 disruptions. Supply from the mines in Africa were especially affected by the spread of the highly-transmissible Omicron variant.

Automakers like Tesla, Toyota, and Volkswagen are attempting to establish their own supply chains and secure future availability.