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EV battery costs set to spike as raw material shortages drags on


The all-electric Ford F-150 Lightning pickup trucks are on display at the Washington Auto Show, Washington.

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A new report predicts that electric cars will become more expensive in the coming four years. This is due to shortages of the key raw materials necessary to manufacture EV batteries.

Sam Jaffe is vice president for battery solutions at E Source in Boulder. He said that the “tsunami of demand” was coming. “I do not believe that the industry for battery solutions is prepared.” 

In recent years, EV battery cell prices have declined as more batteries were produced around the globe. E Source estimates that current battery cell prices average $128/kilowatt hour and will drop to $110/kilowatt hour by next year.

But the declines won’t last much beyond that: E Source estimates battery cell prices will surge 22% from 2023 through 2026, peaking at $138 per kilowatt-hour, before they resume a steady decline through 2031— possibly to as low as $90 per kilowatt-hour.

Jaffe explained that this is because of the growing demand of key raw materials such as lithium to create tens and millions of battery cell cells.

The shortage of lithium is already a real problem. He stated that it is impossible to make batteries without mining lithium.

The Albemarle Corp. Lithium mining in Calama, Antofagasta, Chile on Tuesday July 20, 2021.

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E Source forecasts that the expected rise in battery prices could cause the cost of electric vehicles to go up between $1,500-$3,000 per unit. It also decreased its projections of EV sales for 2026 by 5-10%.  

According to LMC Automotive’s latest forecast, EV sales will surpass 2 million per year by then. As more Americans become interested in electric vehicles, automakers will likely introduce many electric models. 

More and more auto executives warn about the importance of producing more materials essential to EVs. FordJim Farley CEO called for greater mining to support the launch of F-150 Lightning, its all-electric electric F-150 Lightning.

“We need mining permitting. Farley stated that we require processing precursor and refinement permits in the U.S. and the government and the private sector need to collaborate and bring them here.” Farley spoke with CNBC.

TeslaElon Musk, CEO, encouraged the mining industry to extract more nickel as soon as possible in 2020.

Musk claimed that Tesla would offer a large contract to you for a prolonged period of time, if your nickel mining operations are efficient and environmental-friendly.

E Source says that despite industry leaders and government officials agreeing on the need to do more to source raw material, there is still an incredibly low number of projects.

The price of lithium has increased nearly 900% within the past 18 months. We had expected that capital markets will open up the floodgates and allow for the establishment of dozens new lithium mining companies. The firm stated in its report that instead, investments came in small amounts, most of which originated from China to support the Chinese supply chain.

—CNBC’s Meghan Reeder contributed to this article.