A GM employee presents an example of the company’s new generation of lithium-metal batteries at the GM Chemicals and Materials Laboratory in Warren, Michigan, September 9, 2020.
Steve Fecht | General Motors | Prospect | through Reuters
BEIJING – Rising demand for electric car batteries will drive up prices for key materials, Goldman Sachs analysts said in a March 18 note.
This, in turn, will lead to an increase in battery prices by about 18%, affecting the total profit of electric car manufacturers, as the battery represents about 20% to 40% of the cost of the vehicle, Goldman analysts said.
While the report did not indicate specific commodity price targets, the analysts’ model predicted a return to historical peak prices would be more than 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 speed up the transition to another type of battery called lithium-iron phosphate (LFP), the report said. Tesla and the Chinese start-up Xpeng are among the car manufacturers that already use this type of battery, which does not use nickel or cobalt, but stores relatively less energy.
If nickel prices hit an all-time high of $ 50,000 a tonne, $ 1,250 to $ 1,500 per electric vehicle could be added, which could affect consumer demand for cars, analysts said.
Finally, the growth of the electric car industry and the demand for battery materials depends on how many vehicles people buy. The benchmark for consumers in general to switch from gas-powered vehicles to electric cars is generally expected when the cost of the battery has dropped sufficiently.
This change could happen in the next decade. Goldman predicts that battery costs will fall below those of internal combustion engines in 2030.