Lithium Price Drop Raises Hopes of EVs Becoming More Affordable in India

 

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.

 

Nevertheless, Ankit Mittal, Co-Founder and CEO of Sheru, an energy storage business, believes that the drop in lithium pricing is due 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.

 

According to Akshay Singhal, Founder and CEO of Log9 Materials, a battery technology business,“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.”

 

Yet, there may be no clear relationship between falling raw material prices and EVs.

 

According to Mittal, the latest price fall is the outcome of a tremendous surge that began in mid-2022 and saw prices soar by 550% in 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 the basic material pricing.

 

“It would take six to seven months for Indian manufacturers to see the impact of this price decrease since the extracted cheaper metals will go to cell manufacturers, and then the Indian battery makers will be able to acquire it, assuming prices remain where they are,” he added.

 

India sold one million electric vehicles in 2022 alone, a 300% growth year on year. In 2016, EVs accounted for 4.7% of total automotive sales in the country.

 

Lithium Prices to Continue Trending Down

 

Several 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.

 

According to Kalyan C Korimerla, MD and Co-Promoter of Etrio, an EV startup, the price drop is mostly 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.

 

Long term, the recent finding of lithium reserves in regions like Jammu and Kashmir, as well as cobalt deposits elsewhere, will almost certainly result in lower battery prices. “This will assist enhance electric car production and EV sales in India and other areas of the world,” Korimerla added.

 

The recent lithium find in India is anticipated to be 5.9 million tonnes, 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.

 

Alternatives to Lithium

Over time, the high-priced metal has dominated the battery business; nevertheless, industries all over the world have been creating several alternatives to lithium-ion batteries in order to make EV and battery storage choices cheaper.

 

Mittal said, “In the short term, at least until the latter half of the decade, we expect lithium-based batteries to dominate in EVs. They are still on the learning curve and see constant efficiency gains, leading to cheaper EVs with better ranges and more safety. However, several promising battery chemistries are in the development stage. Sodium-based ones might be the leader in this regard as they offer advantages over Li-ion in numerous aspects while being based on a raw material that is much more abundant.”

 

Singhal believes that other technologies are still in their infancy and that much more effort is required before they can be used commercially. “The other technology alternatives for lithium-based batteries in the market are Metal-Air Batteries, Sodium-based Batteries, and Redox Flow Batteries. These are fundamentally more cost-effective due to the lower cost of materials required. However, the technologies are still in the nascent phase and need maturity. Also, in many such cases, the EV use case is challenging due to either lower charge-discharge capabilities or lower energy density or lower cycle efficiency.”

 

While the industry searches for alternatives, it is apparent that lithium-ion batteries will continue to dominate the market in the foreseeable future. The latest lithium finding in India has boosted hopes that the market could shift away from China, reducing long-term reliance, but mining will take time to begin.

 

The price decline in lithium carbonate is certainly considered as a relief for the market, which is typically perceived as being overpriced, with the expectation that it would assist drive EV adoption even further.

 

According to a recent Berkeley Lab research, the majority of the 2 million tonnes of lithium required by 2040 for new EV and grid-scale battery storage systems may be produced locally in India using newly discovered deposits. According to the report, the discovery, combined with significant cost reductions in clean technologies, can pave the way for cost-effective energy independence by 2047.

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Content Credit: MERCOM clean energy insights