The need to move from fossil fuels to environment-friendly electric vehicles (EVs) has largely been accepted across the world. But the high prices of EVs, with battery costs being a major component, is a big dampener for now.
While a rise in awareness regarding global warming is pushing consumers towards electric vehicles (EVs), their steep price remains a big deterrent in the growth of the EV sector. An average EV battery costs about Rs 5 lakh and the ones that go into premium models sell for more.
In December last year, several EV makers had to raise the prices of their automobiles due to the rise in cost of raw materials like nickel, copper, cobalt, and manganese. The demand-supply mismatch in lithium-ion triggered by the pandemic has also been pinching manufacturers. As batteries remain the most integral part of EVs, a rise in their costs leaves a massive impact on the price of the vehicle itself.
Why are EV batteries expensive?
Like laptops or mobile phones, EVs also use a rechargeable lithium-ion battery. These batteries have two electrodes -- cathode (positive) and anode (negative) -- which store and release electricity. While the anode is made using synthetic graphite, which costs relatively less, the metals needed for cathode -- nickel, copper, cobalt, and manganese -- are expensive as they are mined, processed, and then converted into high-purity chemical compounds. These metals turn out to be more than half of the overall battery cost.
While battery costs had been declining since 2010, the recent surge is largely because of the disruption brought about by the pandemic. After the pandemic, battery-makers were overwhelmed with demand but they couldn't cater to it due to several factors, including labour shortage and pandemic restrictions. This led to a demand-supply gap, causing a rise in their prices. Another reason for the high price of these metals is their high demand.
Further, the high dependence on China also didn't help as the country went through a coal shortage during which several plants couldn't function properly. Despite this, 80 percent of cell manufacturing still takes place in China.
Experts say once we move over this demand-supply gap, the price of lithium-ion batteries will start to come down again. Among the reasons contributing to this drop in battery price would include manufacturing outside of China, substituting cobalt with cheaper nickel, and the use of low-cost lithium iron phosphate as the cathode material.
According to BloombergNEF, the current price of a lithium-ion battery is $137 per kWh but it will drop to $92 per kWh by 2024 and $58 per kWh by 2030.
(Edited by : Thomas Abraham)
First Published: IST