Will electric cars encounter Waterloo?

There is a big premise for automakers to bet on electric vehicles, and they think batteries will get cheaper. In 2019, Volkswagen executives waved charts and said battery costs would steadily fall. Many at the time thought gasoline cars would be a thing of the past.

This prediction was accurate and correct for many years. The cost per KWh battery was $1,000 10 years ago and will drop to $130 in 2021. Electric vehicles have become possible in thousands of homes.

But the market has changed somewhat because of the Russian-Ukrainian conflict. Of course, it may also be caused by the desperate release of water by various countries. The price of nickel lithium cobalt is rising due to increased global demand. 11% of the world's nickel comes from Russia, because the price of nickel is already high in the war conflict.

Farasis Energy noted that the cost of three feedstocks in a 60KWh battery has risen from $1,395 a year ago to $7,400 in March this year. As a result, battery companies, automakers, and suppliers are beginning to worry, and the profits of electric vehicles are reduced.

Jürgen Rittersberger, Chief Financial Officer of Audi, said: "We want to reduce the cost of batteries, but now raw material prices are a heavy burden. Audi has threatened to produce only electric vehicles after 2026.

It's not just nickel lithium and cobalt that are rising, but also the aluminum, iron and copper needed for gasoline cars. Volkswagen Chief Financial Officer Arno Antlitz said: "We have to remember that car batteries require special materials ... But don't forget that the catalytic converters used in cars with internal combustion engines require rhodium palladium and platinum to manufacture, in short, the cost of electric and gasoline vehicles will increase. ”

Thomas Becker, who runs BMW's sustainable business, said he wasn't worried. He explained: "We have signed long-term supply contracts with battery suppliers, so the supply structure will not be affected for the time being. For now, it's a bit premature to make predictions about the lasting structural impact of supply chains. ”

It is also important to note that oil prices have also risen a lot, and the demand for electric vehicles is increasing with the help of this factor.

About 1.1 million battery electric vehicles were sold in the first two months of this year, up 90% year-on-year. After the outbreak of the Russo-Ukrainian War, everyone's interest in electric vehicles has increased a lot.

Paul Philpot, head of Kia UK, said: "The growth in demand for electric vehicles over the past few weeks is alarming. ”

AutoTrader, the UK's largest online car market, found that about a quarter of user searches in March were electric, up 15% from a month ago. Ian Plummer, commercial director at AutoTrader, said rising oil prices are the main reason for the growing focus on electric vehicles.

The cost of raw materials for batteries accounts for about one-third of the overall price of electric vehicles, and in the long run, electric vehicles are likely to rise.

Samsung Securities analyst Chang Jung-hoon believes that if the price of nickel rises by 10%, the cathode price will rise by 2.4%. The spot loan price of nickel on March 7 was $42,995, which if directly converted into battery prices, equates to a 26% increase in cathodes and a 6% increase in the price of the entire battery.

SK On is a well-known battery manufacturer, and YJ Kim, the company's head of purchasing, said that it is actively hedging against rising raw material prices, which will eventually have a negative impact on the company's profits.

LG Chem said: "If the uncertainty continues, it will have a negative impact on the battery and electric vehicle industries in the long run, and we are paying close attention." ”

Who will bear the price increase? It's probably up to automakers to negotiate with suppliers. Vitesco is a German automotive supplier that manufactures drivetrains. Werner Volz, CFO of Vitesco, believes it should be possible to pass on 80 percent of the increased costs to manufacturers.

Some analysts believe automakers' interest in electric vehicles may fade a bit, as they realize that electric vehicles are not as profitable as previously anticipated.

Kim Young-woo, an analyst at SK Securities, said: "Automakers may turn to high-end petrol vehicles due to declining profits from electric vehicles. Rising prices for nickel and other metals could worry electric vehicle and battery makers because high prices affect consumer interest in electric vehicles. ”

Volkswagen believes that large-scale sales of electric vehicles and cooperation with Ford can help the company control the cost of electric vehicles. Andy Palmer, CEO of electric bus maker Switch Mobility, believes battery prices will still fall in the long run. He said: "Through the adjustment of technology and the expansion of the economy, I think the price of batteries will fall." ”

Andy Palmer added: "When the Nissan Leaf was started that year, the cost per kWh battery was about $1,000, and now it's down to a few hundred dollars. Over time, battery production prices will certainly fall, driven by demand and supply. “

Even as prices rise, the increase in electric vehicle sales seems unstoppable.

Kim of SK On said: "Electric vehicles and batteries are closely related to the megatrend of controlling carbon emissions and cannot be considered from a profit perspective alone. The price of nickel does affect the demand for electric vehicles, but it is therefore too much to assert that the demand for electric vehicles will fall. ”

SNE Research noted in the report that South Korean battery makers are likely to raise prices by 30-40% due to rising costs, and they are discussing long-term contracts with automakers. James Oh, vice president of SNE Research, said: "We recently held a meeting with Korean battery manufacturers to adjust the price of electric vehicle batteries accordingly. They say prices are likely to rise before 2024 or 2025. ”

James Oh also said that while companies did not disclose how much the price would rise, the increase in lithium nickel cobalt manganese prices could lead to a 40% increase in battery costs by 2025. The average price of lithium batteries last year was $147-153 per KWh. Batteries account for 30-40% of the total price of electric vehicles.

Jay Kim, vice president of LG Energy Solution, said that solid-state batteries use vulcanized electrolytes, and the rise in lithium prices has also affected solid-state batteries. Compared to other types of solid-state batteries, sulfide electrolyte solid-state batteries are very expensive because they require more lithium. LG aims to commercialize vulcanized electrolyte solid-state batteries by 2030. (Xinghai)