We’re mere weeks into 2022 and already lithium prices have soared to record heights due to supply chain issues. As a key ingredient used in the production of EV batteries, the soaring price of the integral commodity could threaten the price parity between conventional vehicles and EVs we’ve been promised.
According to Oilprice.com, lithium carbonate prices within China reached a high of $41,925 per ton at the end of 2021, marking the highest-ever price of lithium. In fact, the price of lithium carbonate in China jumped nearly 500 percent in 2021. China is the globe’s leading supplier of the rare earth element.
As a result, the high lithium prices could cause battery prices to rise for the first time since 2010. Those higher component costs would likely be trickled down to consumers on the retail end, but with EVs already outpricing conventional internal combustion-powered vehicles, it’s likely to push price parity between the propulsion types back even further.
Analysts say there is still plenty of steam to push lithium prices even higher. The surging material cost is placing unforeseen cost pressures on battery pack manufacturers and could even potentially threaten the decade-long slide in battery cost that was expected to drive EVs toward mainstream adoption. Battery pack prices have come down 89 percent between 2010 and 2021.
Lithium-ion battery pack prices were above $1,200 per kilowatt-hour in 2010, but in the decade since prices had come down to just to $132/kWh in 2021. It’s thought battery-pack prices could rise some 3 percent to roughly $135/kWh during 2022. It doesn’t help that just about every major automaker is looking to scale production of zero-emission vehicles, and demanding their own share of the key metal.
It’s long been thought the critical crossover point for EV adoption hovers around battery pack prices of $100/kWh, analysts were expecting that point sometime around 2024. It’s a critical time for automakers as many have committed to an all-electric future on the basis of margin growth in EV sales. However, the lithium price spike will likely force automakers into choosing between reducing those critical margins or passing costs onto consumers, at the risk of hampering EV adoption for some years.
If it’s this early in the EV game and we’re already seeing massive price spikes in response to increasing global demand, what does this mean for the future of automobiles? Combustion vehicle transaction prices have been steadily rising in the past few years as a result of increased mobility aids and safety systems, now we’re going to replace a cost-efficient propulsion method with over 100 years of development in favor of one highly susceptible to raw material price spikes.
There’s long been talk of cleaning up our energy dependence on oil supplies from human rights-violating countries in the Middle East. How do people feel about putting the future of our personal mobility in the hands of the Chinese government, a country with just as poor a record of human rights violations and clear disregard for environmental health and climate change?
But gasoline is the problem, right.