During the two years of the COVID-19 pandemic, raw material prices for electric vehicles (EVs) have increased more than four-fold, leading to rising prices of automobiles that will hit consumers the hardest.
According to AlixPartners, average raw materials costs for EVs totaled $8,255 per vehicle as of May, up from $3,636 per vehicle in 2021 and $1,875 on average per vehicle in 2020.
Materials such as cobalt, nickel and lithium are the highest priced and just so happen to be in the highest of demand due to their use in the production of batteries that power EVs.
The insight echoes statements made by Stellantis CEO Carlos Tavares in May that raw material shortages are coming in the years ahead and could jeopardize the transition of the automotive industry as it leaves gasoline- and diesel-powered engines behind in favor of electrified models.
Tavares said he expects a shortage of EV batteries to arise during the 2024-to-2025-time frame, followed by a raw materials shortage for these batteries, causing a slowdown in availability and adoption of EVs by 2027 to 2028.
AlixPartners said that the raw materials price increases are not just for EVs as material costs for internal combustion engine (ICE) vehicles have also more than doubled from an average of $1,779 in 2020 to $3,662 per vehicle in May. The uptick in prices is the result increases in steel and aluminum, the company said.
EV slowdown possible
AlixPartners said the number of EV models launched by automotive original equipment manufacturers (OEMs) is expected to increase to more than 200 models by 2024, up from just 80 today.
However, with material costs spiking, automakers will be forced to increase pricing on vehicles, potentially forcing a slowdown in EV launches. It could also potentially pause what is billed as the largest transition in automotive history as OEMs move away from pushing EVs to refocus on profitability, AlixPartners said.