A GM employee gives an example of the company’s next-generation lithium metal batteries at GM’s chemical systems and materials lab in Warren, Michigan, on September 9, 2020.
Steve Fecht | General Motors | Brochure | via Reuters
BEIJING – Growing demand for electric car batteries will drive up prices for major materials, Goldman Sachs analysts said in a March 18 note.
In turn, this will cause battery prices to rise by about 18%, which affects the total profit of electric car manufacturers, as the battery accounts for between 20% and 40% of the vehicle’s cost, they said Goldman analysts.
While the report did not give specific commodity pricing targets, the analysts ’model predicted that a return to historic highs would double the cost of lithium for electric battery manufacturers. Cobalt would also double, while the cost of nickel would increase by 60%.
A new type of battery
The limited availability of nickel suitable for car batteries could even accelerate the switch to another type of battery called lithium iron phosphate (LFP), according to the report. Tesla and Chinese start-up Xpeng are among the carmakers that already use such batteries, which do not use nickel or cobalt but store relatively less energy.
If nickel prices hit an all-time high of $ 50,000 per tonne, that could add $ 1,250 to $ 1,500 per electric vehicle, which could hurt consumer demand for cars, according to analysts.
Ultimately, the growth of the electric car industry and the demand for battery materials depends on the number of vehicles people buy. Consumers are generally expected to be able to switch from gas-powered vehicles to electric vehicles when the cost of the battery has dropped enough.
This change could occur in the next decade. Goldman predicts battery costs will drop below internal combustion engines by 2030.