The International Energy Agency (IEA) reports that the current state of global affairs means that it is not certain that electric vehicles will continue to be cheaper in the near future.
Its most up-to-date 2022 Global EV Outlook report states that prices of commonly used raw materials in batteries such as cobalt, lithium and nickel have risen. Batteries are the most expensive part of the EV, so the price increase is a natural conclusion.
For example, in May 2022, lithium prices were seven times higher than at the beginning of 2021. The “unprecedented” demand for EV batteries and the lack of structural investment in new supply capacity have been cited due to the increase in global sales. As the driving reason.
Russia’s aggression in Ukraine has caused further controversy as Russia supplies about 20 percent of the world’s ‘high-purity’ nickel.
“The rapid increase in EV sales during the epidemic has tested the resilience of the battery supply chain and exacerbated Russia’s war challenge in Ukraine,” the report said.
So while battery prices fell 6.0 percent to 13 US132 per kilowatt-hour in 2021, which is listed as a slower drop than the 13.0 percent drop recorded the previous year, there is no guarantee that this cost reduction will continue until 2022.
In fact, the company says that if metal prices in 2022 are as high as in the first quarter, battery packs will be about 15 percent more expensive than in 2021, “all the rest being equal.”
“However, the relative competitiveness of EVs is not affected by the current oil price environment,” the report added. Little comfort!
Against some backdrop of market conditions, global sales of EVs doubled to 6.6 million vehicles by 2021, equivalent to about 10 percent of total new-car sales worldwide.
Global sales of electric vehicles grew strongly in 2022, with nearly two million sales in the first quarter, up 75 percent from the same period in 2021.
The increase in EV sales in 2021 was initially led by China, which accounted for half the growth. The first quarter of 2022 shows a similar trend, with sales in China more than doubling, along with growth of 60 percent in the United States and 25 percent in Europe.
Diversification of the battery supply chain is considered a key requirement.
China produces three-quarters of the claimed lithium-ion batteries and occupies about 70 percent of the production capacity of the cathode and 85 percent of the production capacity of the anode. More than half of the processing and refining capacity of lithium, cobalt and graphite is located in China.
Europe is responsible for more than one-fourth of global EV production, but is home to “very little of the supply chain” except for 20 percent of cobalt processing.
The United States has a smaller role in the global EV battery supply chain, currently accounting for only 10 percent of EV production and 7 percent of battery production capacity.
Both Korea and Japan “have substantial shares in the lower supply chain of raw material processing”, especially in the production of cathode and anode components, the report added.
Korea is responsible for 15 percent of cathode material production capacity, while Japan is responsible for 14 percent of cathode and 11 percent of anode material production.
“As the road transport electrification net expands to meet zero ambitions, the pressure on the supply of critical materials will continue to increase,” the IEA added.
“Additional investment is needed in the short term, especially in mining, where lead time is much higher than in other parts of the supply chain.
“The projected mineral supply by the end of 2020 is in line with the demand for EV batteries. Promises and declarations [made by governments and car-makers].
Demand for lithium is projected to increase sixfold to 500 kilotons by 2030, with the equivalent of 50 new average-sized mines required, the IEA claimed.
Wealth-rich countries such as Australia, Chile, and the Democratic Republic of the Congo have the most raw material mining and are operated by a few large multinational companies.
“If current high product prices bear up, cathode chemicals could move to a less mineral-intensive alternative. Lithium iron phosphate chemistry, for example, does not require nickel or cobalt, but comes with a lower energy concentration and is therefore more suitable for short-range vehicles, ”the company estimates.
This battery chemistry is especially large in China; For example, in the Australian market, the Tesla Model 3 (made in Shanghai) uses this type of LFP battery, which dominates local EV sales.
Maturity of battery recycling, setting up a closed component loop, has been listed as an essential area for further investment.