Ms. Zhou, who lives in Seattle, USA, has been a little annoyed lately.
She took a fancy to the Tesla Model Y electric car last year. While hesitating to buy it, she watched as the price of the car's long-endurance version rose all the way to $58,900 (about 375,000 yuan).
"If I could have expected this model to be priced nearly ten times in the United States last year, I would have started earlier." However, I still have some concerns about electric vehicles, so I still need to think about it. She said in an interview with the first financial reporter, "I pay more attention to the driving sense, but electric vehicles generally cannot drive more than three hours continuously." Even though the journey takes only two hours, I look for a charging station as soon as I arrive at my destination. ”
For the repeated price increases of hot electric vehicles, Tesla said that the price adjustment reflects the actual situation of cost fluctuations. "We are facing an uncertain environmental and cost structure." Tesla's chief financial officer (CFO) Zachary Kirkhorn previously said at the earnings conference.
In fact, since the end of last year, battery prices have been rising, which is adding great uncertainty to the cost of electric vehicles. According to market research firm IHS Markit, in late 2021, lithium-ion battery prices rose by about 10% to 20%. According to Bloomberg New Energy Finance (BNEF), the average global price of lithium-ion battery packs by the end of 2021 is $132/kWh (about 840 yuan).
Li Gangfeng, an analyst at European mining fund Commodity Discovery, said in an interview with the first financial reporter that the reason why the price of batteries has risen is due to the surge in sales of electric vehicles and the shortage of upstream battery raw materials, resulting in an imbalance between battery supply and demand. "The biggest risk to the electrification transformation of the global automotive industry is that there are not enough upstream raw materials, which may threaten the eviction transformation goals of many countries." He said.
Why are battery prices rising
Li Gangfeng said that the main reason for the recent rise in battery prices is that the sales of electric vehicles soared last year, driving the growth of battery demand. But the price of key metals in batteries is soaring, making battery supplies less.
According to Benchmark Mineral Intelligence, an organization that tracks the global battery supply chain, global electric vehicle sales will grow 112% year-on-year to more than 6.3 million units in 2021. From the beginning of January 2020 to the middle of January 2022, the prices of battery-grade cobalt, nickel sulfate and lithium carbonate rose by 119%, 55% and 569%, respectively. Taking ternary material batteries as an example, the cost of cathode materials containing metal elements such as lithium, cobalt, and nickel accounts for nearly 50% of the cost of battery materials.
Li Gangfeng believes that there is a gap in battery demand and supply, mainly due to the large time difference between mining minerals, setting up battery factories and producing cars in the electric vehicle industry chain. According to US media statistics, it usually takes 10 years to open a new mine, about 3 years to build a battery factory, and the development cycle of an electric vehicle is about 2 years, and about every 10 hours, a Tesla car comes off the production line.
Li Gangfeng further explained that compared with batteries and electric vehicles, the upstream mineral production cycle is longer, in addition to its own production problems, but also in the development and mining of external resistance. "The problem in Europe is the opposition of the surrounding residents, the problem in North America is the lack of local enthusiasm, and the problem in Latin America is the gradual rise of resource nationalism." he said.
In Serbia, Spain and other European countries, a large number of local residents and environmental organizations oppose the construction of lithium mine projects. In North America, from the perspective of the progress of mining companies implementing upstream projects and investors implementing battery raw material projects, their enthusiasm is lower than that of Asia-Pacific countries, resulting in slow project progress. One of the world's largest producers of lithium, the Chilean government's mine development policies are becoming increasingly unfriendly. Recently, Chile's Constituent Assembly passed a proposal to promote the nationalization of important assets such as copper and lithium mines in the country.
Trend Force Jibang Consulting analyst Zeng Youpeng said in an interview with the first financial reporter that the price of upstream raw materials has risen, and the reason why battery supply has been affected is that some battery manufacturing countries lack international pricing power for raw materials. At present, lithium, cobalt and other new energy metals lack a more transparent trading mechanism, and it is difficult for battery manufacturers to avoid the risk of price fluctuations.
In general, controlling commodities is pricing power. According to the United States Geological Survey (USGS), 44%, 22% and 9% of the world's lithium reserves are currently distributed in Chile, Australia and Argentina; 50.7% of cobalt reserves are concentrated in the Democratic Republic of the Congo. The above mines are mainly controlled by giants such as Chilean mining and chemical industry and Switzerland's Glencore.
In terms of trading, compared with non-ferrous metals such as copper and aluminum, lithium and cobalt currently lack a large transparent mechanism. The main trading mode is the direct docking of the mine resource end and the spot of the end customer. It was not until mid-2021 that the Chicago Mercantile Exchange and the London Metal Exchange each listed lithium futures contracts. In January, the Singapore Exchange said it planned to launch lithium and cobalt futures contracts in the first half of 2022.
The picture shows Benchmark's lithium price index in recent years.
Prices have soared since the second half of last year
Cost less than $100/kWh hopeless?
In the electric vehicle market, "the cost of batteries to $100/kWh (about 640 yuan)" has long been seen as a milestone – if the cost of batteries falls to this price, consumers will be more cost-effective than fuel cars.
"Previously, it was expected that this milestone could be reached in 2024. But now, we are getting farther and farther away from that goal. Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, said. Bloomberg New Energy Finance said that if there are no other improvements that can mitigate the current impact, this may delay the schedule for lithium-ion battery prices to fall to $100/kWh by two years.
Li Xuan, a senior analyst in the technology industry of Haitong Securities, said in an interview with the first financial reporter that the price of raw materials will still rise because the fundamentals of supply and demand of battery raw materials will still tighten. At the same time, the demand for electric vehicles will also rise. This means that the price of batteries is easy to rise and fall in the next year.
CITIC Construction Investment predicts that it is expected to achieve 730,000 tons of lithium carbonate equivalent supply of global lithium resources in 2022. If measured by the global sales of 9.41 million electric vehicles in 2022, it is estimated that the global demand for lithium resources in 2022 will be about 700,000 tons of lithium carbonate equivalent.
Bloomberg New Energy Finance (BNEF) said that in the next decade, battery demand or will increase by more than 20 times, its scale or will reach TWh (billion kWh) scale.
However, Li Xuan reminded that after the soaring price of upstream raw materials, the cost of electric vehicles will be increased, which will gradually affect terminal demand, which in turn will affect the sales of electric vehicles and batteries.
In 2022, the financial subsidies for electric vehicles in Germany, France and other countries will continue to decline. Zeng Youpeng also said that considering that most of the electric vehicle manufacturers have not yet achieved profitability, there is not much room for the cost of battery raw materials for vehicle companies to rise.
Benchmark Mineral Intelligence said that at present, some battery manufacturers that offer long-term fixed-price contracts have offered variable price transactions to electric vehicle manufacturers, and this "cost pass-through" clause has forced electric vehicle manufacturers to bear the impact of rising raw material costs.
Seek new types of alternative batteries
In the face of the current shortage of upstream raw material supply, many companies are still constantly "sweeping mines" in the world. Recently, China Mining Resources (002738. SZ) invested 1.1 billion yuan to acquire lithium mines in Africa. Benchmark Mineral Intelligence said that in addition, whether it is a vehicle company or a battery manufacturer, there are actually many ways to deal with the current rising battery price trend.
Recently, Tesla, BMW, Renault, Ford and other car companies have said that they will consider switching to a more cost-effective lithium iron phosphate battery. This allows batteries to use cheaper iron in the cathode, rather than more expensive metals such as cobalt and nickel.
Benchmark Mineral Intelligence also said battery manufacturers can also grow battery recycling businesses. As new battery chemistries can offset demand for metallic materials such as cobalt and nickel, this will continue to expand upstream sources of raw materials.
The potential solution to the lithium shortage is to replace electrolytes. Last year, a battery manufacturer launched a sodium-ion battery, which greatly reduced the lithium content required for the battery. While the technology is still in the experimental phase, the companies said they plan to build a complete battery supply chain by 2023.
Gene Berdichevsky, CEO of battery component maker Sila Nanotechnologies and former Tesla employee, said using lithium iron phosphate batteries instead of ternary batteries is a better solution for the moment.
However, in Li Gangfeng's view, any battery technology innovation and large-scale production will face certain risks, and there is still a distance from the production of battery technology and mature design.
Benchmark Mineral Intelligence said that as new mining projects continue to come online, it is expected that in the second half of the 21st century, the bottleneck in the battery supply chain may be solved. Although commodity prices are rising, battery and electric vehicle prices are expected to fall as more manufacturers join the EV market.