The EV Battery Conundrum: Commodity Rally Could Reverse Cost Curve

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Oil Price: At the end of last year, BloombergNEF reported that the price of electric vehicle batteries had for the first time fallen to $100 per kWh. This is widely considered the tipping point for EV adoption because this battery price level makes the vehicle as cheap as an internal combustion engine car. Yet before anyone could really celebrate the news, other reports started coming in: a shortage of semiconductors, used generously in EVs as well as ICE cars; a looming shortage of steel because of supply chain disruptions resulting from the pandemic; but worst of all, warnings about a supply crunch in battery metals and minerals because of the projected boom in demand.

Come now, you rich, weep and howl for your miseries that are coming upon you! Your riches are corrupted, and your garments are moth-eaten” James 1:5

“When the chip shortage is over, the major supply shortage the industry faces would be batteries,” Yang Hongxin, chairman of Chinese battery maker SVolt Energy Technology Co., told Bloomberg in an interview this month. “The production capacity of battery cells will be tight in the next few years because expansion takes time.”

All global carmakers are in a rush to secure enough battery materials for their ambitious EV programs, many of them driven to these programs by EU governments that have tightened emission allowances for the car industry significantly. Demand from drivers in Europe is also on the rise: last year, 11 percent of all car sales on the continent were all-electric and plug-in hybrid vehicles. Governments provide generous incentives to stimulate this demand and their efforts are paying off. But commodity prices are rising. Read More

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