The cost of raw materials explodes on electric cars

In 2028, electric vehicles (cars and light commercial vehicles) will represent 44% of the European auto market (8% in 2021), 40% in China, 28% in North America, according to Alix Partners. By adding rechargeable hybrids, the consultant expects 56% of electrified models on the Old Continent in six years (14% in 2021), 46% in China, 32% across the Atlantic. The European Parliament voted on June 8 in favor of banning thermal vehicles, even rechargeable hybrids, on sale in 2035. The European Council should ratify this ban at the end of June.

From 2024, the ten main manufacturers will offer 221 electric models worldwide (80 in 2021), according to the study by Alix Partners unveiled on Thursday. Automotive groups will also have announced over the past two years 94 billion dollars of investments to be made on purely electric vehicle programs in Europe for the four-year period 2022-2026, i.e. almost twice as much as for the period 2020-2024. For the whole world, the investments announced amount to more than 520 billion (230 covering the years 2020-2024).

Cost explosion

The problem is that the planned energy transition is weighed down by an explosion in costs. Already much more expensive than thermal models, electric ones “see their cost in raw materials per car increase drastically due to cobalt, nickel and lithium, to 6,533 dollars per vehicle in May 2022, compared to approximately 2,924 in April 2021, i.e. an increase of 123% in one year”, according to Alexandre Marian, director at Alix Partners. “Electric vehicles are proving to be more sensitive to increases in the cost of raw materials than those with internal combustion engines,” he says.

On a classic gasoline model, the costs of raw materials have indeed gone from 1,475 dollars per vehicle in 2020 to 2,827 (+ 91% in two years). Lithium has seen its price downright triple in one year, nickel has doubled. Contrary to previous forecasts by experts, the cost of batteries will not drop drastically with the popularization of electric batteries. Batteries, which represent up to 40% of the cost of an electric model, cost $131 per kWh in 2021. They are expected to increase to $119 in 2024! That is a decrease of only 12 dollars in three years. What to shower the enthusiasms.

The cost of the components of an electric “amounts to 24,000 euros”

The cost of the components of an electric “amounts to 24,000 euros, against 15,000 for a thermal vehicle”, specified at the end of the year 2021 the associate director of Alix Partners following a previous study on the costs. The cost of an electric vehicle will be “by 2030 still 4 to 5,000 euros higher than that of a thermal model”, then agreed Alexandre Marian.

Pending the announced electrification, Alix Partners is hardly optimistic for the auto market this year. He predicts a drop in global vehicle sales to 79 million units (90 million before Covid in 2019). In France, Alix Partners expects sales of passenger and light commercial vehicles to fall to 2 million in 2022, compared to 2.7 million in 2019. In the medium term, “the higher price of electric vehicles is likely to maintain a level of demand overall number of vehicles below pre-Covid levels,” said Laurent Petizon, also director at Alix Partners.