Car manufacturers are finding it increasingly pricier to manufacture electric vehicles (EV) as the costs of procuring lithium, one of the main components found in every commercial EV battery, has shot up almost 280 percent since the start of the year.
The demand for electric vehicles has pushed up demand for the metal, and supply has not been able to keep pace. Lithium is a vital ingredient for rechargeable batteries. The price hike will not only impact vehicles but also mobile phones and laptops.
Carmakers are also struggling to get their hands on raw materials including lithium, semiconductor chips, copper, and aluminum. Experts claim that lithium will be harder to obtain and investments are needed for mining and producing the requisite amounts.
Automobile manufacturers have been enthusiastic about the move to electric, with many companies proclaiming a complete shift from fossil-based engines to electric tech as early as 2040 or even 2030.
While new mining infrastructure takes time to set up and the production capacity of existing ones are relatively low as the raw material is located deep in the earth’s core, the sudden increase in demand has affected prices and availability.
Other alternatives exist, for example, sodium-ion batteries with far greater availability and less costs of production. But it will take years to establish a new supply chain and mass-produce sodium. Based on the current hype around climate change, lawmakers, looking to appease, are eagerly bringing on legislation to ban petrol and diesel vehicles.
According to estimates by Benchmark Minerals, “lithium carbonate prices could increase production costs of lithium iron phosphate (LFP) battery cells by at least 16%,” hiking costs for electric vehicles. Meanwhile, Chinese battery-grade lithium carbonate prices have gone up by 346 percent in 2021.
Contemporary Amperex Technology (CATL), the world’s biggest battery maker, is making plans to increase investment in the upstream raw material supply chain, and said recently that a mining subsidiary would be set up in Yichun, China. The company is also in talks with Argentina’s state energy company YPF regarding lithium exploration in the country.
The price for lithium carbonate, used in cheaper electric cars, has gone up 289 percent in 2021 to reach $24,000 per ton, based on data from Benchmark. Longer-range electric motors, found in more pricier versions, use lithium hydroxide, which has increased by 192 percent to around $26,000 per ton.
“I think it’ll go higher,” says Benchmark chief executive, Simon Moores, reports The Telegraph. “Long-term lithium demand is locked in; the question is how much you get out of the ground and into EVs as quickly as possible.”
Lithium carbonate is used to make LFP batteries that need cobalt, the controversial element found in The Democratic Republic of Congo.
Mining practices followed in the African country have been tainted with human rights abuses. Currently, more electric vehicle manufacturers are switching to lithium carbonate, and the rise in prices is expected to be passed on directly to the end-user.