electric cars face rising lithium-nickel battery costs

BEIJING – Rising demand for electric car batteries will cause the prices of major materials to soar, Goldman Sachs analysts said in a March 18 note.

This in turn will cause battery prices to rise by around 18%, affecting the total profit of electric car makers since the battery accounts for around 20% to 40% of the cost of the vehicle, Goldman analysts said.

While the report did not give specific price targets for commodities, analysts’ model predicted that a return to historic peak prices would more than double the cost of lithium for electric battery makers. That of cobalt would also double, while the cost of nickel would increase by 60%.

The limited availability of nickel suitable for car batteries could even accelerate the switch to another type of battery called lithium iron phosphate (LFP), according to the report. Tesla and Chinese start-up Xpeng are among the automakers already using this type of battery, which uses neither nickel nor cobalt but stores relatively less energy.

If nickel prices hit an all-time high of $ 50,000 per tonne, it could add $ 1,250 to $ 1,500 per electric vehicle, which could hurt consumer demand for cars, analysts said.

Ultimately, the growth of the electric car industry and the demand for battery materials depend on the number of vehicles purchased. The tipping point for consumers to switch from gasoline vehicles to electric cars is generally expected to occur when the cost of the battery has fallen sufficiently.

This change could happen over the next decade. Goldman predicts that battery costs will drop below those of internal combustion engines in 2030.