Analysts at Goldman Sachs (331.77, – 7.56, – 2.23%) said in a recent report that the increase in demand for electric vehicle batteries will lead to a surge in the prices of main raw materials, which in turn will increase the price of batteries by about 18%, affecting the total profits of electric vehicle manufacturers, as batteries currently account for about 20% to 40% of the cost of electric vehicles.
Although the report does not give specific target prices for these commodities, analysts’ models predict that if lithium prices return to historical highs, battery manufacturers’ costs will more than double. The price of cobalt will also double, while the price of nickel will rise by 60%.
“The prices of these three major natural resources have been rising since early 2021,” the Goldman Sachs report said. We believe that in order to promote the sustainable development of the electric vehicle industry, some countries may consider implementing policies to increase national inventories. ”
The report said the limited supply of nickel for automotive batteries could even accelerate the transition to another type of battery called lithium iron phosphate (LFP). Auto makers such as Tesla (662.16, – 7.84, – 1.17%) and China Xiaopeng auto are already using the battery. The battery does not use nickel or cobalt, but it stores relatively little energy.
Analysts at Goldman Sachs said that if nickel prices hit an all-time high of $50000 a ton, the price of each electric car could rise by $1250 to $1500, which could hurt consumer demand for cars.
Ultimately, the growth of the electric vehicle industry and (7.99, – 0.05, – 0.62%) demand for battery materials depend on how many cars people buy. It is generally expected that consumers will generally switch from gasoline powered vehicles to electric vehicles when the cost of batteries falls sharply.
This shift is likely to take place in the next decade. Goldman Sachs predicts that battery costs will fall below the cost of internal combustion engines by 2030.