Some analysts have warned the extraordinary rises in prices of battery ingredients including lithium will force carmakers to hike up the cost of electric vehicles, raising the threat of demand destruction.
The cost of EVs could rise off the back of sustained highs for the price of lithium.Credit:Shutterstock
“Historically, the battery price cost curve had been declining at a pace of 3 per cent to 7 per cent annually for so many years in a row it almost seemed inevitable,” analysts at investment bank Morgan Stanley said.
“The world has changed, and along with it is a new paradigm of input costs.”
End-users of raw lithium products in the US and Europe have longer contracts less exposed to the ballooning price of lithium and other chemicals, while China’s battery players are exposed to higher prices.
Mr Brinsden, who said 90 per cent of Pilbara’s product went to China, believes this could affect the price of EVs in the short term but argues supply chain issues are pushing up the price of most new vehicles.
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“Do you really worry about paying $3000 more for an EV? I think the answer is no,” he said.
UBS analyst Lachlan Shaw said lithium prices were “at or near all-time highs” and were expected to remain elevated as indicators of consumer interest in EVs continued to go “from strength to strength”.
“The order books to buy an EV in Europe now is well into 2023, so you have to wait over a year to get an EV in some cases,” Mr Shaw said.
Australia is the world’s biggest producer of lithium, accounting for an estimated 30 per cent of known resources.
Mr Brinsden says unlike North Asia, Australia won’t become a battery manufacturing powerhouse but will need to invest in adding value to lithium and reducing waste to access markets in the US and Europe.
“The current spodumene solution is not going to cut it when you’re delivering 95 per cent waste to Europe and they have to store it somewhere in their backyard,” he said.
The federal government has been prioritising funding to enlarge Australia’s critical minerals sector, including backing projects to seize opportunities to grow the nation’s lithium-hydroxide refining capacity.
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