Sales of electric vehicles have surged worldwide this year, even as sticker prices have soared, defying decades of conventional wisdom that said electric vehicle sales would only begin to take off when the cost of batteries fell below the threshold that had always been just around the corner.
Even as the average price of lithium-ion cells rose from $105 per kilowatt-hour last year to a projected $160 in the first quarter of this year, demand for EVs has remained strong. Due to market supply outages, sanctions on Russian metals, and investor speculation, the cost of production has increased.
Internal combustion vehicle fuel costs have risen sharply since Russia infiltrated Ukraine, and environmental concerns are also driving more buyers to choose electric vehicles, despite the volatile economy.
Price increases for electric vehicles have increased by double digits, ranging from Tesla to SAIC-GM Wuling, which makes the Hongguang Mini. The increased battery costs added nearly $1,500 to the sticker price of a smaller car like the Hongguang Mini, China’s best-selling EV.
For the past three decades, the cost of batteries has dropped as a result of technological advancements and increased production. Data from the industry showed that the average cost of $105 per kilowatt-hour in 2021 was nearly 99 percent lower than the over $7,500 in 1991, according to the data.
As significant investments by automakers and suppliers to mine, refine, and produce battery cells and to diversify raw material sources, and a move to shift the balance from shortage to surplus are expected to tip the scales, battery costs are expected to continue to rise for the next year or so.
Battery cell costs of $100 per kilowatt-hour have long been anticipated by the industry as a sign that electric vehicles had reached price parity with their fossil fuel equivalents. As gas prices rise and consumer tastes shift, analysts say this may not be as important as it seems.
Stan Whittingham, a co-inventor of lithium-ion batteries as well as a 2019 Nobel laureate, said EV growth in China and other markets “is going up faster than people thought—faster than the supply of materials.”
Chris Burns, CEO of Novonix, a Halifax-based battery components supplier, says that environmental and climate concerns have driven consumers, particularly younger ones, to choose EVs over those that burn fossil fuels. According to Burns, “many young people entering the market are making purchasing decisions beyond simple economics and are saying they will only drive an EV because they are better for the planet” A gas-powered vehicle is “less expensive,” but they’re going ahead with it anyway.
The Indian electric vehicle market was worth US$ 1,434.04 billion in 2021, and it has been projected to grow to USD 15,397.19 billion by 2027, at a CAGR of 47.09 percent over the forecast period of 2022 to 2027.