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In the past, the electric car was considered expensive and this was put down to lithium. Although its price has since come down, there are still no affordable electric cars on the market.

lithium

Higher margins for manufacturers versus lower end prices

Battery

In comparison to the year 2020, when the price of lithium reached a significant turning point of $5,600 per ton, currently white gold is trading around $44,700 per ton. Although this price is still far from its historic peak of $88,600 per ton in 2022, it remains to be noted that the average cost of cobalt has more than halved in recent months, while that of copper has fallen by around 18%.

Despite the increasing sale of electric cars on the global market , the falling prices of these materials essential for the supply chain of the battery and, therefore, of the electric vehicle, could help manufacturers to reduce their production costs without affecting their profit margins considerably if this downward trend continues in the long term.

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Source: Reference Minerals

Fostering competition in the electric vehicle market is crucial to reduce prices and encourage mass adoption. For this, it is necessary to put in place policies that encourage companies to offer more competitive prices and to fight for market share. Indeed, buyers are currently cautious about the high average prices of electric vehicles, which are still a significant investment. By offering incentives to companies to lower prices, it would create a virtuous circle where competition drives demand and demand drives competition.

Unfortunately, in some key countries in the plug-in car market such as Norway, Germany and China, purchase aids have been reduced or removed in recent months. This situation has led to a significant drop in sales of electric vehicles, making the transition to more sustainable means of transport even more difficult. To promote the adoption of these technologies, it is therefore imperative to maintain purchase aids or strengthen them to encourage buyers to switch to electric cars.

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The containment of final demand could cause a disruption in the cost of raw materials, especially for a material that is difficult to extract and transform. The increase in supply due to the emergence of new mines and processing plants for the material could also have an impact on its price. However, despite these factors, the material remains profitable for its main producers, costing between $5,000 and $8,000 per ton to produce and selling for 10 times more.

Even though the cost of the raw material can be affected by fluctuations in demand and supply, it is still extremely profitable for producers, as it is difficult to extract and process. According to Mobility Impact Partners , production costs are between $5,000 and $8,000 per ton , while the selling price is ten times higher. New mines and processing plants could increase supply, but this would not necessarily have a negative impact on prices.

In January, Tesla cut prices for several of its models, such as the Tesla Model 3 and Model Y , in response to reduced demand. Ford followed with a price reduction for its Mustang Mach-E.

Tesla

The two manufacturers have recently taken steps to ensure a continuous supply of lithium , fearing a possible shortage that could lead to higher prices in the short and medium term. They benefited from protectionist measures such as the IRA in the United States to ensure a constant supply. However, in such a volatile commodity market, it is difficult to predict the future trend, and technological improvements may affect lithium demand unexpectedly.

It should be noted that the solid-state batteries developed by various companies would require even more lithium than the batteries currently used, which would increase the demand. However, such batteries are unlikely to be used in mass-produced vehicles for several years. On the other hand, the development of other technologies such as sodium batteries could reduce lithium requirements, which would affect demand and prices significantly.

Overall, the lithium market is unpredictable and dependent on many factors. Manufacturers must be proactive to ensure a constant supply of lithium to deal with a possible shortage. However, improving battery technologies and the emergence of new alternatives could change the situation at any time. It is therefore important to closely monitor future developments in the commodity market.

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Lithium, cobalt and copper are essential materials for the production of electric car batteries. Although lithium reached its all-time high at the end of 2022, it has seen a 20% decline since last January. If this downward trend continues, it could lead to lower production costs for electric vehicles. Additionally, cobalt and copper prices have also fallen in 2023, which is good news for automakers looking to reduce battery production costs.

These downward trends could have a significant impact on the electric vehicle market by reducing battery production costs. This could stimulate demand for electric cars and accelerate the transition to more environmentally friendly vehicles. However, it is important to note that the demand for these materials will also increase as the production of electric cars increases, which could lead to higher prices in the future.

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