For Tesla and other automakers building plug-in electrified vehicles, rising lithium cost may undercut their ability to sell these cars in the $35,000 price range.
Lithium carbonate, the raw materials used in lithium-ion batteries, more than doubled in price towards the end of last year. That price trend has continued upward this year, rising to as much as $23,000 a ton in recent weeks.
With increasing manufacturing schedules, including the Tesla Model S starting production late next year, demand for lithium could keep the raw material price high and electric vehicle sticker prices higher than expected. As Navigant Research reported two years ago in its Electric Vehicle Batteries report, lithium ion batteries are here to stay as the main choice for future hybrids and EVs at least until 2023.
Tesla Motors’ goal is to produce 500,000 EVs per year, which will have a real impact on the lithium supply. “In order to produce a half-million cars per year,” Tesla CEO Elon Musk said during the March 31 debut of the Model 3, “we would basically need to absorb the entire world’s lithium-ion production.”
One reason that lithium prices are high is that the supply is limited and controlled by only a handful of countries – Australia, China, and Latin America’s “lithium triangle,” Argentina, Bolivia, and Chile. Bolivia has sharply cut back on new mining due to protests by its indigenous population, reports OilPrice.com.
Beyond the Tesla Model 3, demand for lithium will be coming from a few other automakers. General Motors plans to compete head on with the Model 3 when its Chevrolet Bolt rolls out later this year. The battery price, and its effect on MSRP, will be a factor in how GM measures profitability.
Volkswagen has made ambitious plans to produce and sell more EVs, as the German automaker struggles with its diesel car emissions scandal. VW says it will roll out 20 battery electric vehicles and plug-in hybrid electric vehicles by 2020.
Other major automakers are investing significantly in EVs in the near future. The question will become: Will their sticker prices be competitive enough to raise EV sales and automaker profits?