The cost of batteries for electric vehicles will rise sharply due to the tightening of the shortage of raw materials

Visitors look at the Ford F-150 Lightning all-electric pickup truck at the Washington DC Auto Show on Tuesday, January 25, 2022.

Bill Clark | CQ-Roll Call, Inc. | Getty Images

According to a new report, the cost of producing electric vehicles will rise over the next four years due to a shortage of key raw materials needed to produce battery cells for electric vehicles.

“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 for this.”

The price of battery cells for electric vehicles has come down in recent years as production has risen worldwide. Battery cells currently average $128 per kilowatt-hour and could cost around $110 per kilowatt-hour by next year, E Source estimates.

But that decline won’t last long: E ​​Source estimates that battery cell prices will rise 22% from 2023 to 2026, peaking at $138 per kilowatt-hour before they resume a steady decline until 2031 – possibly as low as $90. per kilowatt hour. kilowatt hour.

Jaffe said the predicted surge is the result of growing demand for key raw materials such as lithium, which is needed to produce tens of millions of battery cells.

“There is a literal shortage of lithium, and there will be an even more severe shortage of lithium. You can’t make batteries if you don’t mine lithium,” he said.

Salt pools at Albemarle Corp.’s lithium mine. in Calama, Antofagasta Region, Chile on Tuesday, July 20, 2021

Cristobal Olivares | Bloomberg | Getty Images

E Source predicts that the expected rise in battery costs could push the price of electric vehicles sold in 2026 to somewhere between $1,500 and $3,000 per vehicle. The firm also cut its 2026 electric vehicle sales forecasts by 5% to 10%.

U.S. electric vehicle sales will top 2 million a year by then, according to the latest forecast from consulting firm LMC Automotive. Automakers are expected to introduce dozens of electric models as more Americans embrace the idea of ​​going electric.

Automotive executives are increasingly warning about the need to produce more of the materials needed for electric vehicles. Last month, Ford CEO Jim Farley called for increased mining in connection with the company’s launch of the all-electric F-150 Lightning.

“We need permits for mining. We need permits to process precursors and recycle in the US, and we need the government and the private sector to work together to get them here,” Farley told CNBC.

Tesla CEO Elon Musk back in 2020 urged the mining industry to boost nickel production.

“Tesla will give you a giant long-term contract if you mine nickel efficiently and environmentally,” Musk said during a July 2020 conference call.

While industry and government leaders agree that more needs to be done to get raw materials, Source E says the number of mining projects is still surprisingly low.

“With the price of lithium up nearly 900% over the past eighteen months, we assumed the capital markets would open the floodgates to create dozens of new lithium mining projects. it comes from China for the Chinese supply chain,” the company said in a report.

– Megan Ryder of CNBC contributed to this article.

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