The war in Ukraine is underway and still nothing foreshadows that it will end soon. Will the staggering pace of EVs’ sales continue, or will the war in Ukraine hit the plans of the automakers concerning the EVs?
The rising cost of raw materials, exacerbated by the Russian invasion of Ukraine, could thwart the dream of Tesla chief Elon Musk and other automaker executives to launch more affordable electric vehicles.
Rising prices of nickel, lithium and other materials threaten to slow and even temporarily reverse the long-term trend of reducing the cost of batteries, the most expensive part of electric vehicles, preventing wider uptake of the technology, said Gregory Miller, an analyst in the industry
“The increase in raw material prices certainly has the potential to delay the timeline for the cost parity between EV and ICE vehicles, which could hinder wider adoption of EV,” Miller said, referring to the vehicles with an internal combustion engine that dominate the market.
This year could mark the first annual increase in the average price of lithium-ion battery cells, he said.
The conflict in Ukraine pushed nickel prices to an 11-year high due to fears that exports from top producer Russia could be disrupted. Lithium prices have also risen, more than doubling since the end of the year, as supply falls short of growing demand.
It should be emphasized that Russia produces about 7% of the extracted nickel in the world. It is also a large supplier of aluminum and palladium.
“Anything that increases costs will prevent the adoption of EV,” said Cox analyst Michelle Krebs. Electric vehicles accounted for about 9% of total global vehicle sales last year according to the International Energy Agency, and consulting firm AlixPartners expects that share to reach about 24% by 2030. In this context, Tesla increased the price of its cheapest Model 3 sedan by 18% to $44,990 from December 2020, with Elon Musk recently pointing out that Tesla is not developing a $25,000 car it promised because of the above problems.