The huge spike in raw materials prices that reversed the downward trend in battery prices is now easing, according to bank analysts studying the market.
Russia’s war on Ukraine, combined with a surge in demand from car companies looking to secure supply for ever more ambitious EV growth plans, pushed prices of raw materials such as nickel, lithium and cobalt to record levels in March.
However, the peak of the price craziness may be over, according to bank UBS.
“The bottom line is that commodity prices have reversed since the peak in early March,” research analyst Juan Perez Carrascosa wrote in a report.
It calculated that the price per kWh for a high-nickel NMC811 lithium ion battery has fallen from $150 (£120) in March to $135 (£108) by the end of May.
UBS estimates that the increase in raw material prices has now added €1,100 (£937), roughly 3%, to the bill of materials cost for a battery-electric car compared with the end of last year, versus about €2300 (£1962) as of March, as commodity costs fall.
The fact that the surge in raw materials pricing, including for non-battery materials such as steel, has come at a time when car makers are hit by a shortage of semiconductors has actually helped them, UBS points out.
“For as long as the car market remains undersupplied, OEMs will likely be able to pass on the lion's share of the cost burden,” Perez-Carrascosa wrote.
For Autocar Business webinars and podcasts, visit Autocar Business Live
That means customers, for now anyway, are willing to pay the higher prices to get into a new car, which in turn means the car makers can progress with their electrification plans without worrying too much whether they will get a return on their investment. And that investment is massive.
EV spending now accounts for “at least half” of so-called legacy carmaking R&D spend, German bank Berenberg wrote in a report at the end of May.
The big US investment bank Goldman Sachs went further last week to “call the end of the bull market” on lithium, cobalt and nickel prices, as one rival analyst described the bank’s conviction that we’ve seen the top of high battery-material prices.
The Goldman Sachs report referenced new investment, particularly in the Chinese breakthroughs, in extraction of lithium from an alternative mineral called lepidolite.