Has lithium become too expensive for EVs?

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Has lithium become too expensive for EVs?

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 Has lithium become too expensive for EVs?
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Highlights

  • The spot price CIF China, Japan and Korea for lithium hydroxide rose more than 14% in March.
  • There are two types of lithium cells in the market, and the LiFP-based cathode is cheaper and more fireproof.
  • Globally, battery makers are committed to increasing the energy capacity of Li-ion batteries to make them more affordable and efficient.

In what shows Australians’ growing love for electric vehicles, the country recently saw 109 Hyundai electric SUVs being sold out in only six and half minutes. Out of nearly 18,000 Aussies who had registered their interest, only 109 got lucky to get their hands upon the AU$80,000 car.

Meanwhile, the state government of California has excluded the largest EV manufacturer Tesla from the Clean Vehicle Rebate Project due to its high price. Rebates are allowed only for vehicles priced up to US$45,000. The cheapest model of Tesla costs around US$47,000. Though Tesla recently hiked its prices, all Tesla cars that will be rolled out in 2022, have already been sold out.

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What’s happening in Australia and the USA shows that the craze of EVs is at its all-time high despite high prices.

Meanwhile, the United Kingdom government has banned the sale of new petrol cars from 2030, while South Korea will prohibit the purchase of new diesel vehicles by 2025. Several other countries have introduced a series of steps to promote EVs. Though demand for EVs is skyrocketing, the supply side has a long way to go before it catches up with demand.

Related read: Japan’s Panasonic to invest US$700 mn for Tesla battery production

Earlier in March, Tesla CEO Elon Musk tweeted that the significant rise in prices of raw materials had forced the automaker to increase its vehicle costs. On 3 March 2022, the spot price CIF China, Japan and Korea for lithium hydroxide stood at US$63.5/kg, which soared 14% to US$72.5/kg on 24 March 2022.

Lithium is a key component of batteries powering EVs. Nickel, cobalt, manganese, and aluminium are also used but in small proportions in Li-ion batteries. Since the war broke out between Ukraine and Russia, the prices of several metals have been on the rise. Nickel and copper are showing a strong upward momentum, making batteries and EVs more costly to manufacture.

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What’s the future of EV and lithium batteries?

A global revolution is happening in the battery industry. Everyone is working on improving the energy density batteries to increase their range and life. At present, there are two types of lithium batteries available in the market. One of these use cobalt, nickel, manganese and aluminium in cathodes, while the other uses lithium iron phosphate or LiFP as cathode.

The one with multiple elements is costlier. Cobalt is the most expensive component of these batteries, and research is underway to replace or reduce the usage of cobalt. General Motor’s NMCA cell has succeeded in reducing cobalt usage by 70%.

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The LiFP cathode-based cells are used extensively by the Chinese battery industry. Industry experience shows that LiFP, despite being less expensive, is more fireproof under extreme conditions.

Tesla plans to use LiFP cells in its vehicles to make them cheaper. The mineral is abundant and has less supply chain complexity with respect to multi-element cathodes.

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Research work is also progressing to improve the anode of the battery. The conventional lithium battery uses graphite as anode. On Tesla’s Battery Day in 2020, Elon Musk emphasised on using silicon in the anode part of the battery. Silicon has nearly 10 times higher energy capacity than graphite. The problem with silicon is that it swells on charging, posing serious accident hazards while charging.

There are some breakthroughs in using silicon in anode by treating it with high purity alumina and then including a small percentage with graphite. The work is still in the initial phase but looks promising.

Meanwhile, efforts are being made to replace lithium in the battery. With lithium resources concentrated in a few countries like Australia, Argentina, and Chile, the battery sector fears a monopoly situation to erupt, like what happened in the crude oil space.

Vanadium is another such metal that is being seen as an alternative to lithium. Also, hydrogen cells have been there for quite some time now but so far there have been few prototypes only.

Also read: Here’s why mining majors are cashing in on lithium rally

Lithium looks set to continue its dominance in the battery industry for years to come. Technology is advancing at a fast pace, so it is very difficult to predict the future but as per the current set-up, when the world is becoming used to lithium cells, it is unlikely to be replaced in the near future. 

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