Welcome back to The Electric!
The spiking cost of battery metals is wreaking havoc on the expected economics of early electric vehicles. This week, we look at some of the strategies the automakers will have to undertake to avoid huge losses on their sales.
Major automakers seem prepared to proceed on schedule with the collective launch of scores of mainstream-price electric models by 2025 despite a huge spike in the cost of battery metals. Ford, General Motors, Volkswagen and others are showing a striking determination to absorb the cost increases, even at the risk of losing money on sales of their coming EV models. Their impetus: an existential threat from Tesla and fear of losing market share to their establishment rivals.
Until recently, the EV deluge had a clear economic foundation: The cost of batteries—from 25% to 40% of the total price of a vehicle—had dropped by a total of 90% since 2010, and was projected to continue falling. Around 2025, industry analysts forecast that low battery costs would allow EVs to be priced the same as similar combustion vehicles.
Instead, battery metal costs have spiked, threatening EV economics. The price of nickel, a key metal in battery cathodes, hit an 11-year high just last week. For the rest of the decade, metals analysts are forecasting chronic shortages and surging prices for most battery materials.
