Ford and GM Rush to Keep EVs Low as Battery Costs Rise

• BloombergNEF reports that battery prices rose for the first time since a decade.
• This is a problem for both car companies and the electric vehicle industry.
• Automakers are racing to get those costs down — but it’s not going to happen overnight.

The prices of electric car batteries are on the rise for the first time since a decade. This is a problem for automakers who have been betting their futures on a shift from the internal combustion engine. 

That increase — the effect of rising costs for battery ingredients like lithium, cobalt and nickelAccording to a new report from Bloomberg NEF — likely won’t impact vehicle prices anytime soon, experts say. And it’s probably a temporary bump: BNEF predicts prices will drop in 2024, as more lithium production comes online. 

It’s still bad news for automakers Ford and GM, who are in the midst a historic transition, and startup EV manufacturers, all of whom would like electric cars to make profits sooner than later.  

“The huge rises in materials prices,” Andreas Breiter, an automotive partner at McKinsey, said, “make it more difficult to produce an electrical vehicle profitably.”

So, carmakers are racingTo counteract these price increases. According to the October 2018 average new EV price, it was $64,249 Kelley Blue BookAutomakers also know that EVs are much more affordable to do this work. 

These are just a few possible solutions

First, automakers are trying to establish US battery supply, since most American players have relied on foreign supply chain. This summer’s stipulations are driving a lot of the work required to bring US-based battery supply chains. climate lawThis is the ties crucial tax creditsto the manufacturing of EV materials and components at home.

GM signed a contract with Australia’s Controlled Thermal Resources to tap into its mining effortsCalifornia. Ford is buying lithium from ioneer’s mining project in Nevada.

Automobile manufacturers are also exploring different kinds of batteriesTo reduce their dependence upon traditional lithium-ion batteries and to increase their highly-in-demand ingredients.  

“While we have experienced headwinds,” Rivian CFO Claire McDonough stated about battery costs at a Deutsche Bank industry event in June. 

Automakers are also in the process of establishing recycling plansAs returning the materialsThey could invest less in new ones if they can get the supplies they need back.

There are still roadblocks to overcome

All these fixes come with their own problems.

Establishing an EV battery supply chainIt is not possible to do it in a day. It takes years to get there. lithium mine up and running. Plus, many players — auto giants, startup players, and everyone else building battery-powered products — are competing for the same supplies. 

Any new developments are also welcome EV battery mixThere are trade-offs. For example, if you use certain materials, you might have to compromise on energy-density or faster charging capabilities. Automakers don’t want to be forced to do this, despite a push to convince customers that EVs are as enjoyable and as useful as gas-powered vehicles. 

Potential car-buyers should not expect that automaker ideas will quickly emerge due to the many challenges in the EV battery space.

Matt Sculnick, executive Director of Nomura Greentech’s advanced transportation team, stated that “there are still potential supply chain questions over the entire industry,” with a large portion of those concerns being around batteries.