Looking to Buy an Electric Car?  Think Again

Edited by: TJVNews.com

Lithium, the common ingredient in almost all electric-car batteries, has become so precious that it is often called white gold. But something surprising has happened recently: The metal’s price has fallen, helping to make electric vehicles more affordable, as was recently reported in the New York Times.

At the beginning of March, Bloomberg reported that the news of a 25 percent price drop in lithium by a Chinese lithium miner has brought hope to the EV industry.

The price drop is due to a combination of increased supply and a shift in the market, according to a report on the warpnew.com web site.  The Chinese lithium miner has played a key role in driving down prices, which could potentially benefit EV manufacturers. Warpnews.com also reported that lower lithium prices could lead to increased profitability for EV manufacturers, which could eventually translate into lower EV prices for consumers. This could make electric vehicles more accessible for a wider range of people and could create a more competitive market, leading to innovation and improvement in the industry.

The NYT reported that according to Benchmark Minerals, since January, sales of electric vehicles have catapulted as the price of lithium has gone significantly down.

In February, Car and Driver Magazine, caranddriver.com reported that the “so-called Inflation Reduction Act signed by President Joe Biden in August 2022 expanded purchase incentives for new electric vehicles, and added one for used EVs as well. Called Section 45X, it funds 10 years of production credits for manufacturing battery cells, photovoltaic solar cells, and components for wind energy. And it has the potential to make EV batteries built in the U.S. so cheap that large swathes of Western cell and battery manufacturing will rush to locate in North America.”

The NYT also reported that other elements such as cobalt, which is another important battery material, has fallen in price by more than half and copper which is essential to electric motors and batteries has slipped about 18 percent in price. The report indicated that the prices have dropped even though U.S. mines and copper-rich countries like Peru are struggling to increase production.

Car and Driver recently interviewed an experienced EV battery production specialist who asked not to be named. This person pointed them to Section 45X, which in one fell swoop will cut one-third to one-half off the total cost of any EV battery with both cells and pack built in the U.S.

The battery expert to whom Car and Driver spoke to suggested this means “all carmakers assembling vehicles in the U.S. will ultimately build their own battery factories, whether through joint ventures (like GM-LG) or designing and building their own cells (like Tesla’s efforts to bring its 4680 cells to market in large volumes). Designing and building cells directly reduces or eliminates profits to a third-party cell maker, but it’s far from a core competence today for most makers.”

The sharp moves have confounded many analysts who predicted that prices would stay high, or even climb, slowing the transition to cleaner forms of transportation, an essential component of efforts to limit climate change, the NYT reported.  In June 2022, ABC in Australia reported that Goldman Sachs was forecasting a “sharp correction” in lithium prices, according to media reports.

Instead, the drop in commodity prices has made it easier for carmakers to cut prices for electric vehicles. The NYT reported that this month, Tesla lowered the prices of its two most expensive cars, the Model S sedan and Model X sport utility vehicle, by thousands of dollars.

Speaking to the NYT, Kang Sun, the chief executive of Amprius Technologies, a young battery maker that this month announced plans for a factory in Colorado, said,  “For electric vehicles, the major roadblock is cost. The falling price of lithium, he said, “is going to promote EV sales.”

Dr. Sun thinks prices could fall much further because demand for the metal has not risen as fast as some in the industry expected, the NYT reported.

Even after falling so much, lithium prices remain so high that mining and processing the metal is an unusually profitable business, according to the NYT reported. The metal, uniquely suited for batteries because of its ability to store energy, costs about $5,000 to $8,000 per ton to produce. The NYT also reported that according to Mobility Impact Partners, a New York private equity firm that invests in the electric vehicle industry, among other areas, it It sells for 10 times that amount.

Shweta Natarajan, a partner at Mobility Impact Partners who has analyzed the lithium market, told the NYT that, “You can’t have profit margins that are 10 times what it costs to extract. You will see that come down.” She added that, “Financing is very easy to come by.  There is no reason to think you wouldn’t have new projects opening up to meet any shortages.”

Jose W. Fernandez, the under secretary for economic growth, energy and the environment at the State Department, told the NYT that the supply of lithium has to increase 42-fold by 2050 to support a transition to clean energy.  In an interview, Fernandez said, “We have to find additional sources of supply because 42 times is a lot. Right now, we don’t have enough.”

Fernandez also said that supplies of lithium and other critical materials are a national security issue. He told the NYT that last year the administration established the Minerals Security Partnership, which is a group that includes the European Union and 12 industrialized nations, including Australia, Japan and Britain, to locate mining opportunities and financing, and to promote recycling.

There is plenty of lithium in the world. But it was not considered very valuable until sales of electric vehicles began to take off in the last few years, the NYT reported.  As demand soared, the industry rushed to start new mines, and refineries increased their capacity to process the ore.

Bold Baatar, the chief executive of the copper production unit at the mining giant Rio Tinto, told the NYT that, “the mining is not what is driving the costs. It’s the availability of processing facilities.”

Most lithium refineries are in China, and few managers and engineers outside that country know how to build processing plants, the NYT reported. Beijing’s near-monopoly on an essential resource alarmed the Biden administration, which has allocated billions of dollars to encourage companies to develop lithium mines and refineries in the United States or in countries with which it shares close political and economic ties, according to the report.

A source familiar with the electric vehicle industry and the fluctuation in prices of lithium and other battery materials who spoke to the Jewish Voice on the condition of anonymity said that the problem with electric vehicles as a future transportation trend in the United States is not only that such vehicles are cost prohibitive for the average American who is struggling to pay basic expenses in this inflationary era, but that currently there are not enough charging stations.

“In the present, if someone were to consider the purchase of an electric vehicle, not only would they be paying way, way more for it than a standard petro car, but they would have to deal with the fact that charging the lithium battery would be a real challenge, “ he said.

He also added that even though people are concerned with carbon emissions and exhaust fumes as well as the deleterious effects that gas operated cars may have on the environment, he feels that measures can be taken to significantly limit the negative impact of such traditional gas cars.

“If your car runs out of gas, you can always find a service station to refuel, but with an electric vehicle, at this point, you are really stuck if you can’t get a battery charge. Until such time that EVs really take off and power stations become a ubiquitous sight, the best thing to do is to hold on to your car,” he said.

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