A GM employee poses with a sample of the company’s next-generation lithium metal batteries at GM Chemical and Materials Systems Lab in Warren, Michigan, September 9, 2020.
Steve Fecht | General engines | Handout | via Reuters
BEIJING – Growing demand for electric vehicle batteries will push up prices of key materials, Goldman Sachs analysts said in a March 18 note.
That, in turn, will increase battery prices by about 18%, impacting the overall profits of electric car manufacturers, as battery makes up about 20% to 40% of vehicle costs, Goldman analysts said.
While the report did not mention specific commodity price targets, the analyst model predicted that a return to historic peak prices would be more than double the cost of lithium to electric battery manufacturers. That of cobalt would also double, while the cost of nickel would increase by 60%.
A new type of battery
In fact, limited availability of nickel suitable for car batteries could accelerate a shift to a different kind of battery called lithium iron phosphate (LFP), the report said. Tesla and the Chinese start-up Xpeng are among car manufacturers that already use this type of battery, which does not use nickel or cobalt but stores relatively less energy.
If nickel prices hit their all-time high of $ 50,000 per ton, that could add $ 1,250 to $ 1,500 per electric vehicle, hurting consumer demand for the cars, the analysts said.
Ultimately, the growth of the electric car industry and the demand for battery materials depends on the number of vehicles people buy. In general, the tipping point for consumers to switch from gas vehicles to electric cars is expected to come when battery costs have fallen sufficiently.
That shift could take place in the next decade. Goldman predicts battery costs will be lower than combustion engines by 2030.