Car companies are not loving the negativity around consumer demand for battery-electric vehicles (BEVs) right now.
However, it does have one major advantage – pushing down the price of the materials needed to make them.
Which, as Stellantis CEO Carlos Tavares pointed out recently, helps his company nicely. “Many people are talking about the slowdown on the BEV demand, which has had a huge impact on the raw material cost,” he said. “That is helping us to reduce the total production cost on BEVs faster than the ICE [internal combustion engine].”
Lower-priced raw materials will help make EVs more affordable, solving one of the main pain points in the switch away from fossil fuels. “There will be a reverse situation at one point in time,” Tavares said.
Right now, car makers are cutting the overall purchase price of electric cars, but this discounting is coming at the expense of profit margins. Research by Autocar sibling brand What Car? shows that EV discounts have increased 204% since January 2023 as car makers rush to comply with the UK requirement to sell 22% zero-emission cars in 2024. As a result, sales of BEVs in the UK continued to rise in January.
Many will be sold at a loss, but a greater proportion won’t be thanks to the fall in the price of materials needed to build them, and specifically the lithium ion battery inside. For example, lithium carbonate prices have now fallen 80% since 2022.
This has resulted in a 14% year-on-year drop in the price of automotive batteries, according to an annual survey conducted by energy analyst Bloomberg NEF late last year. It found that battery pack prices had fallen to a record low of $139/kWh (£110), with lithium-iron-phosphate (LFP) battery packs even lower, at $130/kWh.
The lower prices were “driven by raw material and component prices falling as production capacity increased across all parts of the battery value chain,” the BNEF report stated. Meanwhile, “demand growth fell short of some industry expectations.”
Like other commodities, prices of battery metals are driven by forward predictions as much as current demand. Commodities futures are essentially a bet on what the material will be worth at a later date, so gloominess creates discounts. For example, Russia’s invasion of Ukraine in 2022 triggered a spike in prices as traders feared disruption to supply, with nickel at one point surpassing $100,000 per metric tonne. It's currently at $17,601.
That is cheering up car companies tremendously as they double their efforts to strip out costs from expensive electric vehicles. “The raw material costs within the battery supply chain have changed dramatically in the last year,” Rivian CEO RJ Scaringe told investors in February. “So that has a very significant impact on our overall cost structure.”
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