The cost of producing electric vehicles will soar over the next four years, according to a new report, as a result of the scarcity of a key raw material needed to make electric vehicle batteries.
“A tsunami of demand is coming,” said Sam Jaffe, vice president of battery solutions at research firm E Source in Boulder, Colorado.”I don’t think the battery industry is ready yet.”
The price of electric vehicle batteries has fallen in recent years as global production has increased.E Source estimates that the average cost of a battery today is $128 per kilowatt-hour and could reach around $110 per kilowatt-hour by next year.
But the decline won’t last long: E ​​Source estimates that battery prices will surge 22% from 2023 to 2026, peaking at $138 per kWh, before returning to a steady decline — possibly as low as per kWh — in 2031 $90 kWh.
Jaffe said the projected surge is the result of growing demand for key raw materials, such as lithium, needed to make tens of millions of batteries.
“There is a real shortage of lithium, and the shortage of lithium will be worse. If you don’t mine lithium, you can’t make batteries,” he said.
E Source predicts that the expected surge in battery costs could push the price of electric vehicles sold in 2026 to between $1,500 and $3,000 per vehicle.The company also cut its 2026 EV sales forecast by 5% to 10%.
Electric vehicle sales in the U.S. are expected to exceed 2 million by then, according to the latest forecast from consulting firm LMC Automotive.Automakers are expected to roll out dozens of electric models as more Americans embrace the idea of ​​electrification.
Auto executives are increasingly warning of the need to produce more of the material critical to electric vehicles.Ford CEO Jim Farley last month called for more mining around the company’s launch of the all-electric F-150 Lightning.
“We need mining licenses. We need processing precursors and refining licenses in the U.S., and we need the government and the private sector to work together and bring it here,” Farley told CNBC.
Tesla CEO Elon Musk has urged the mining industry to increase nickel mining as early as 2020.
“If you mine nickel efficiently in an environmentally sensitive way, Tesla is going to give you a huge, long-term contract,” Musk said on a July 2020 conference call.
While industry executives and government leaders agree that more needs to be done to procure raw materials, E source said the number of mining projects remains very low.
“With lithium prices up nearly 900% over the past 18 months, we expected capital markets to open the floodgates and build dozens of new lithium projects. Instead, these investments were patchy, most of which It comes from China and is used in the Chinese supply chain,” the company said in its report.
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