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Surging costs of raw materials made worse by Russia's military offensive in Ukraine could set back the dream of Tesla chief executive Elon Musk and other auto executives to create cheaper electric vehicles.
Rising prices of nickel, lithium and other materials are likely to slow and even temporarily reverse the long-term trend of falling costs of batteries, the most expensive part of EVs, hampering the broader adoption of the technology, said Gregory Miller, an analyst at industry forecaster Benchmark Mineral Intelligence.
And that is on top of a supply chain already snarled by the Covid-19 pandemic and the global chip shortage.
"Rising raw material prices certainly have the potential to delay the timeline on cost parity between EV and ICE vehicles, which could hamper the wider adoption of EVs," Mr Miller said, referring to the internal-combustion engine vehicles that dominate the market.
This year could mark the first year-over-year increase in the average price of lithium-ion battery cells, he said.
The conflict in Ukraine has raised the stakes, pushing nickel prices to an 11-year-high on fears that exports from leading producer Russia could be disrupted. Lithium prices also have increased, more than doubling since the year's end, as supply fell short of rising demand.
Russia produces about 7 per cent of the world's mined nickel and is also a large provider of aluminium and palladium.
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A Ukrainian serviceman walks past the vertical tail fin of a Russian Su-34 bomber lying in a damaged building in Kharkiv, Ukraine. AP Photo -
An apartment building damaged after shelling in Kharkiv, Ukraine. AP Photo -
A woman puts her head in her hands as she sits on a cot in a shelter, set up for displaced persons fleeing Ukraine, inside a school gymnasium in Przemysl, Poland. AP Photo -
Belarussian and suspected Russian helicopters on the flight line at Machulishchy Air Base outside Minsk, Belarus. AP Photo -
Children look on as people fleeing Russia's invasion of Ukraine shelter in a school, in Drohobych, Ukraine. Reuters -
Families eat in the shelter. Reuters -
A woman looks out from a building damaged by Russian shelling in Mykolaiv, 100 kilometres away from Odesa, western Ukraine. AFP -
A wounded Ukrainian man waits in the corridor of the central hospital of Mykolaiv. AFP -
An elderly woman is carried in a shopping cart after being rescued from Irpin, on the outskirts of Kyiv, Ukraine. AP -
A woman reacts as a train carrying children from Kyiv's Central Children's Hospital leaves the Ukrainian capital on its way to Lviv. Reuters -
A girl sits in an improvised bomb shelter in Mariupol, Ukraine. AP -
An elderly woman is coated in snow as she sits in a wheelchair after being rescued from Irpin. AP -
Belarusian volunteers take part in military exercises at the Belarusian Company base in Kyiv. AP -
Lessa, left, director of a nursery school turned into a refugee shelter, cries as she hugs Olega, who arrived from Kyiv with her baby, near Lviv. EPA -
Ukrainians pass a damaged bridge as they flee from Irpin. AP -
A man carries an elderly woman as people continue to leave Irpin. AP -
A soldier stands on a barricade made of sandbags in central Odesa, Ukraine. Reuters -
A charred Russian tank and captured tanks in the Sumy region. Reuters -
People rest at a temporary shelter for Ukrainian refugees in Przemysl, Poland. AFP -
Ukraine's ambassador to the Netherlands, Maksym Kononenko, third right, and his wife Tetiana Doroshenko, fourth left, attend a meeting of members of the Ukrainian community with Dutch King Willem-Alexander, third left, and Queen Maxima, second left, to discuss the situation in Ukraine, in The Hague. EPA -
A Ukrainian soldier looks at the destruction after shelling in Ukraine's second-largest city of Kharkiv. AFP -
A refugee holds her dog as they wait for trains to Poland in Lviv, Ukraine. Reuters -
A woman ties ribbons in Ukrainian national flag colours in a girl's hair as people wait at a refugee assistance centre in Prague, Czech Republic. EPA -
A Ukrainian soldier carries an elderly woman crossing the Irpin river on the outskirts of Kyiv. AP -
Lena, who had never left Ukraine before fleeing into Moldova, feeds Dasha, 3, soon after crossing the border. Erin Clare Brown for The National -
Refugees without immediate plans to move further inland can stay the night in tents set up on Moldova's side of the border. Erin Clare Brown for The National -
Tatiana and her son wait for a van that will carry them from the Moldovan border to Chisinau. Erin Clare Brown for The National -
Each night, the Palanca refugee camp in Moldova feeds up to 300 people who arrive with no onward plans. Erin Clare Brown for The National -
People pass a damaged bridge while fleeing the town of Irpin, close to the Ukrainian capital of Kyiv. AP -
A Ukrainian soldier stands guard next to a church in Irpin. EPA -
A firefighter holds the baby of a Ukrainian refugee at the border in Romania. AP -
Ukrainian President Volodymyr Zelenskyy speaks in Kyiv. Reuters -
A Ukrainian soldier at a checkpoint in Kyiv. AP -
Ukrainian activist Ihor Mazur, left, a veteran of the war in the country's east, looks at a night-vision device in Kyiv. AP -
Ambassadors attend a UN Security Council meeting on threats to international security after Russia's invasion of Ukraine, in New York. Reuters -
Ukraine's UN ambassador Sergey Kyslytsya holds a paper with an image of Russia's Foreign Minister Sergey Lavrov as he addresses the Security Council in New York. Reuters -
A road sign put up in support of Mr Zelenskyy outside Russia's embassy in Washington. AFP -
Ukrainian refugees at the train station in Lviv, western Ukraine. EPA -
Lethal and non-lethal Ukrainian aid is loaded on to a plane bound for Poland by Canadian soldiers in Trenton, Ontario. Reuters -
Volunteers carry medical aid and necessities at a train station in Lviv. EPA -
Everton players wear T-shirts in support of Ukraine as they warm up for an English Premier League football match against Tottenham Hotspur. AP -
A residential building damaged by Russian shelling in Chernihiv, Ukraine. Reuters -
A man walks past a checkpoint in heavy snow in Lviv. Getty -
A man fleeing fighting in Irpin waits to cross a river after Russian forces entered the city. Getty -
Soldiers assist Irpin residents underneath a damaged bridge as they flee. Getty -
Ukrainian civilians who volunteered to join the Territorial Defence Forces take part in a training exercise in Odesa after Russia's invasion. Reuters -
Men carry a body to a lorry as people flee from the frontline town of Irpin. EPA -
A Ukrainian police officer runs with a child as the sound of shelling echoes nearby in Irpin. AP -
Parents and children struggle to board a train in Lviv. AP
Rising EV prices — marked by increases over the past year by Tesla and start-up Rivian Automotive — matter because mainstream consumers are not going to pay a large premium for technology that many do not yet fully embrace.
The average EV sold for almost $63,000 in January in the US, about 35 per cent higher than the overall industry average for all vehicles of slightly more than $46,000, research firm Cox Automotive said.
While consumers worry less now about being stranded without power on the roadside, price remains a major concern, a Cox survey showed.
"Anything that adds to the cost will impede EV adoption," Cox analyst Michelle Krebs said.
EVs made up about 9 per cent of total global vehicle sales last year, the International Energy Agency said, and consulting firm AlixPartners expects that share to hit about 24 per cent by 2030.
More than half of consumers are not prepared to pay $500 extra upfront to buy an EV, despite lower operating costs, a 2021 study by OC&C Global Speedometer on consumers in the US, China and other countries found.
That could leave car makers in a bind if they want to attract mainstream buyers, rather than the luxury customers to whom they currently cater.
Tesla has raised the price for its least expensive Model 3 sedan by 18 per cent to $44,990 since December 2020, as supply chain woes weigh heavily. Mr Musk said in January that Tesla would not develop a $25,000 car he promised during 2020 battery day, saying he had too many things on his plate.
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Tesla has revealed an updated version of its Model S. Courtesy Tesla -
An interior view of the 2021 Tesla Model S Plaid. Courtesy Tesla -
Tesla has given the cars all-new interiors, with updated screens and climate controls. Courtesy Tesla -
Tesla says it’s capable of 0-60 in less than two seconds. Courtesy Tesla -
Tesla claims it’s the fastest-accelerating production car in the world. Courtesy Tesla -
t’s also redesigned the battery pack and modules in the new cars. Courtesy Tesla -
It will cost $112,990. Courtesy Tesla
Some US dealers have taken advantage of vehicle shortages to charge more for EVs, sparking warnings from car makers such as Hyundai and Ford.
Rivian tried last week to push through a 20 per cent price increase on its electric pickups and SUVs to offset higher parts costs, but retreated for those who had already placed orders when faced with a backlash that included possible sale cancellations.
Another EV start-up, Lucid Group, has not yet raised prices but chief financial officer Sherry House said in February the company was "definitely studying price" to offset higher supply chain costs.
In China, lithium price rises have pressured the makers of such entry-level models as Great Wall's Ora EV and Wuling Hong Guang's Mini EV because they have less room to push through a higher price tag, investors said.
For start-ups, the pressure is particularly intense.
"If you're a small company, you don't have the ability to tell your suppliers to give you a lower price," said Brett Smith, technology director at Centre for Automotive Research.
Battery makers typically have long-term contracts with car makers, under which prices rise to reflect the increased cost of vital raw materials such as lithium, nickel and cobalt, industry officials said.
LG Energy Solution, a supplier to Tesla and General Motors, said raw materials account for 70 per cent to 80 per cent of the cost of its batteries.
Benchmark Mineral Intelligence said battery producers started increasing lithium-ion cell prices late last year in response to the higher raw material prices they had seen throughout 2021.
