EV battery costs will rise as raw material shortages linger

According to a new report, the cost of producing electric vehicles should rise over the next four years due to a shortage of key raw materials needed to produce EV batteries.

“A tsunami of demand is coming,” said Sam Jaffe, vice president of battery solutions for E Source, a research firm from Boulder, Colorado. “I don’t think the battery industry is ready for that.”

The cost of batteries for EVs has declined in recent years as production worldwide has grown. Batteries currently cost an average of $ 128 per kilowatt-hour, and next year could cost about $ 110 per kilowatt-hour, according to E Source.

But the decline will not continue beyond that: E Source estimates that battery prices will rise 22% from 2023 to 2026, reaching a peak of $ 138 per kilowatt-hour before they resume a steady decline until 2031 – possibly before $ 90 per kilowatt-hour. kilowatt-hours.

The projected surge is the result of growing demand for key raw materials such as lithium needed to produce tens of millions of batteries, Jaffe said.

“There is literally a shortage of lithium, and there will be an even more drastic shortage of lithium. You can’t make batteries if you don’t mine lithium,” he said.

Expected increases in battery costs could boost the price of EVs sold in 2026, by $ 1,500 to $ 3,000 per car, E Source predicts. The company also lowered its EV sales forecast for 2026 by 5% to 10%.

Until then, according to the latest forecast of consulting company LMC Automotive, EV sales in the US will exceed 2 million annually. Automakers are expected to introduce dozens of electric models as more Americans embrace the idea of ​​switching to electricity.

Car drivers are increasingly warning of the need to produce more materials needed for EVs. Ford CEO Jim Farley called for increased production last month after the company launched its all-electric F-150 Lightning.

“We need a mining permit. We need permission to recycle our predecessors and recycle in the United States, and we need the government and the private sector to work together and bring it here, ”Farley told CNBC.

Tesla Back in 2020, CEO Elon Musk called on the mining industry to increase nickel production.

“Tesla will give you a giant contract for a long period of time if you are efficiently mining nickel and in an environmentally friendly way,” Musk said during a conference in July 2020.

Although industry leaders and government officials agree that more needs to be done to produce raw materials, Source E says the number of mining projects is still surprisingly low.

“As the price of lithium has risen by almost 900% over the past eighteen months, we expected the capital markets to open gateways to create dozens of new lithium mining projects. the company report said.

– Megan Reader from CNBC contributed to this article.