As Battery Cell Prices Hit $110/KWH, Challenges Remain- Report

According to Benchmark Mineral Intelligence’s study, Lithium-ion battery cell prices have decreased from $290/kWh in 2014 to $110/kWh in 2020 (large contract automotive), and there is a view in the lithium-ion industry that this trend will continue indefinitely. This in turn will lower the price of electric vehicles and bring cost parity between the internal combustion engine (ICE) and electric vehicles (EV) in the USD 20,000-30,000 mass-market vehicle segment.

But this is not the trigger the industry has been waiting for, not yet at least.

Battery cost analysis is based on mainly two things i.e. economies of scale and technological improvement, but a third critical input to cell costs is the cost of raw materials, which is not considered most of the time. Price volatility is introduced to the automotive battery supply chain at the mineral extraction phase. Here prices are determined by the market fundamentals of supply, demand, cost and inventory level.

This year with its unprecedented demand shock the market has been broadly favourable for EVs, with more and more announcements on EV sales targets, cell and cathode investments. However, the mining finance side of the market has been developing to be a slow-motion disaster. In short, the financing is done for commodities and chemicals, but not for their supply. Mines and refineries require high sunk capital, in challenging social and political environments. They take years to find, define, licence and construct. Geology does not recognise borders and EU and other “Green Subsidies” will not, for example, finance nickel and cobalt mining in Indonesia.

To understand lithium-ion cell costs, you need to know raw materials 

If one looks at what happens to NCM 811 cell costs, then each of lithium, cobalt and nickel hit their highest price levels of the past 10 years. The result is an increase in cell costs from USD 87.2/kwh to USD 119.0/kwh. The same amount of lithium, cobalt, and nickel running along the same production line, but with a 36.5% cost increase.

When a 10% cell producer margin is included, moving from a production cost to a price, in a 70 kWh battery pack this adds almost USD 2,500 to every vehicle. Given raw material markets are widely forecast to see supply deficits in the coming years it would seem to be optimistic to base investment plans on historical performance. Battery costs and prices will not continue to decline because they have declined in the past. Larger factories, higher nickel content, increased energy density from the anode and a thousand incremental improvements will all help drive cell costs lower, but, without investment in mining and refining capacity, these drops could be quickly reversed.

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