Decline in lithium price globally is a hope for affordable EVs
Prices for lithium carbonate, the major component used in batteries, have dropped significantly in recent months, sparking optimism among industry stakeholders that more cheap electric cars (EVs) could lure more customers to the market.
The main ingredient’s price has plummeted from $73,000 per metric tonne in January to $34,000 per metric tonne in March. Cobalt and nickel prices, which are also frequently used in batteries, have declined dramatically in the recent two months.
Most stakeholders believe that the price decline is due to increased mining of the rare metal.
One probable explanation for this significant fall is the expiration of government subsidies in leading markets such as Europe and China.
India sold one million electric vehicles in 2022 alone, a 300% growth year on year. EVs accounted for 4.7% of total car sales in the country.
Some stakeholders believe that lithium prices will continue low as the underlying reasons persist, which will eventually be reflected in reduced EV prices.
According to reports, CATL, one of the leading battery manufacturers, has begun offering discounts, allowing EV makers to acquire parts at a lower cost. As a result, many top manufacturers, like Tesla and Ford, have begun lowering the pricing of their electric vehicles.
The recent lithium find in India is anticipated to be 5.9 million tons, which is much more than the cumulative lithium requirement for the next 20 years.
BloombergNEF reported in December last year that the price of lithium-ion battery packs would rise to $151/kWh in 2022 for the first time since 2010. However, the paper believes that battery prices will begin to fall again in 2024, when lithium prices are predicted to fall due to increased extraction and refining capacity. According to the estimate, average pack prices will fall to below $100/kWh by 2026.
What industry leaders think about this decline in lithium price?
According to Ankit Mittal, Co-Founder and CEO of Sheru, an energy storage business, the drop in lithium pricing might be related to a drop in EV demand in China, where subsidies have been removed. He does not rule out the prospect of price increases if EV demand increases.
The advent of new refining capacity around the world, as well as alternative battery technologies, has resulted in a major price decline for the normally pricey raw material.
Akshay Singhal, Founder & CEO of Log9 Materials, a battery technology company, said, “The surge of supply in comparison to demand is one of the leading causes of the price drop of the metals used in manufacturing the EV battery. A lot of capital has been infused into new lithium mining operations and cathode materials processing plants, though mostly by China. Trends in cobalt prices are more to do with the global shift to reduce the amount of cobalt going into batteries and even completely move away from it. The other factor is the geopolitical situation due to which the prices have dropped.”
Mittal said that the recent price decline resulted from a massive rally that started in mid-2022 and saw prices rise by 550% over 1.5 years.
“This rally had squeezed the margins of automakers, who could not fully pass on the increase in cost to consumers, as it would negatively impact sales. Hence, we do not think the current drop in raw materials prices would be immediately reflected in EV prices. We might only see a drop if raw materials costs stabilize around current levels for some time,” Mittal said.
Singhal acknowledged that EV prices may not fall immediately and proportionately since battery pack or vehicle makers in India have no influence over material supply chains, and cell procurement contracts are not related to basic material pricing.
He added, “It will take six to seven months for Indian manufacturers to witness the impact of this price reduction as the extracted cheaper metals will go to the cell manufacturers, and then the Indian battery makers will be able to procure it, that also if the prices remain where they are.”
Kalyan C Korimerla, MD, and Co-Promoter, Etrio, an EV company, said that the price decline was primarily due to a glut in raw material supplies.
“We expect the prices to continue to drop in the next 12 months due to the growing lithium supply and moderate weakening of the Chinese EV market. In addition, global EV makers have been rushing to secure raw materials over the past two years, which drove the price of lithium carbonate more than sixfold. With the supply coming online faster than ever, we expect lithium prices to drop,” Korimerla added.
In the long run, the recent discovery of lithium deposits in places like Jammu and Kashmir and cobalt deposits elsewhere will likely result in reduced battery prices. “This will help boost the production of electric vehicles and augment the EV sales in India & other parts of the world,” Korimerla said.
This entire article is taken from Mercom India
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