Further price rises for cars are becoming inevitable as the cost of raw materials, already high, shoots up further as a result of Russia’s invasion of Ukraine.
The bind car makers currently find themselves in was exposed by US start-up Rivian, which angered customers waiting for delivery of its high-end electric SUVs and pickups by announcing price rises of around $12,000 (about £9150). Rivian backed down and reverted to its original price for those with pre-orders after a barrage of complaints, but stuck to the increase for anyone else. “A lot has changed” since the cars first went on sale, CEO RJ Scaringe said in a letter. “The costs of the components and materials that go into building our vehicles have risen considerably,” he said.
Meanwhile, in France in March, the media seized on price rises made by Dacia, which pushed the price of the base Dacia Sandero over the psychologically important €10,000 euro mark to €10,590. We in the UK had already passed the £10,000 mark, with the Sandero here now costing from £11,245, up from £9845 in November.
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Stellantis indicated it, too, is going to be charging more for its cars across its 14 brands. “Yes, we are pricing up to cover the raw materials inflation,” CEO Carlos Tavares told journalists at an event held earlier in March. “If we don’t price up, we put ourselves in the red.”
Even before Russia’s invasion of Ukraine, prices for materials such as steel, aluminium, plastics and others were climbing. Last year, a survey of over 1000 automotive executives conducted by KPMG found that the supply chain was the “area of greatest anxiety”, with almost half “very or extremely concerned” about the recent commodity-price volatility on their business in the next year.
Now Russia’s actions and the West’s sanctions are pushing them up further. “It's a new spike of an existing problem,” the bank Jefferies said in a report. Russia is a key supplier of a whole range of metals such as palladium and platinum - precious metals crucial to catalytic convertors – aluminium, copper and nickel.
Nickel is a huge cost element of the most energy-dense electric car batteries, particularly for the latest NMC 811 chemistries (meaning eight parts nickel, one part manganese and one part cobalt). Such were the fears over nickel supply that prices on the London Metal Exchange surged past $100,000 a tonne on 7 March, up from $29,130 the previous Friday, prompting the LME to halt trading.
Lithium is another key element of EV batteries that’s seeing a spike. Demand is outstripping supply. “GM, Ford, BMW and Mercedes-Benz still don’t have access to sufficient lithium to fulfil ambitious plans,” Joe Lowry, president of specialist consultant firm Global Lithium, said on Twitter on 7 March.
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People are worried about if they can afford to keep warm, and food prices going up, so I would imagine getting a new car will be pushed further and further down the list.
I wonder if all this will make the £17,500 list price of the forthcoming VW ID Life increase?