Aditi Shah

NEW DELHI (Reuters) – Tata Motors India’s largest-selling electric vehicle manufacturer, (NYSE:), said that the price of batteries had risen by 20% due to a surge in global raw material prices. This put pressure on them in the short term.

Shailesh Chandra (president of the passenger vehicle business unit) told Reuters cell phone prices have been on the rise for months, and he anticipates that they will continue to climb for at least a year.

It seems that the immediate effect is roughly a 20% increase in inflation, which will create short-term pressure. “This should start to fall within a year,” he stated.

Chandra declined to comment on how this will affect sales and profitability of the company. However, Chandra stated that “green personal mobility demand” was increasing strongly. He expected to offset some cost by increasing local component use in the cars.

Global automakers are experiencing inflationary pressures from rising costs of lithium, cobalt, and nickel that is used to make batteries. This part of the electric vehicle (EV), which is also the most costly component of an EV’s battery system, has seen demand exceed supply.

Russia’s invading Ukraine has made this situation worse. Analysts say that it could slow down the decline of battery prices, which would make it more difficult for EVs to be adopted, particularly in India and other price sensitive markets.

India’s nascent EV markets are home to only 1%. There are few buyers for electric vehicles due to high prices for batteries and insufficient charging networks. More car manufacturers are still working on electric models.

Spot prices for lithium carbonate, which is typically used to make lithium-ion batteries, surged to over $70,000 per tonne in March 2022 from about $10,000 a year earlier, according to data from industry forecaster Benchmark Market Intelligence.

Benchmark’s senior analyst Manish dua said, “Going forward, this inflationary impact will continue.”

Tata raised the Nexon’s price in India recently by $300. It follows similar actions globally by Tesla Inc (NASDAQ:) Inc, and China’s BYD.

Tata still has more than 90% market share in India for electric cars and anticipates that sales will grow fourfold, from 4200 units last fiscal year.

Tata AutoComp Systems is the EV manufacturer. They source lithium-ion batteries from them.

Chandra explained that battery recycling will accelerate and there will be access other than mines to the raw materials, which will alleviate some of the price pressures.

“Short-term spikes will occur. “It is best to concentrate on the secular long-term trend that will continue down,” he stated.