The Fluctuating Cost Implications of EVs Batteries

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Countries across the world are gradually witnessing the manifestation of their long-awaited pursuit of augmenting Electric Vehicle (EVs) sales. Although the transition is slow, it’s still happening. The government’s ultimatum has certainly persuaded the citizens to support the adoption of EVs.?

There still exist purists of gas-driven vehicles, but EVs surely outweigh the many disadvantages of it by reducing noise pollution, lowering maintenance costs, eliminating Greenhouse Gas (GHG) emissions, etc. The shift is being led by factors like escalating fuel prices and EVs are evidently more cost-efficient, thereby helping you save for a rainy day.

Causes of Surging Prices

• The battery costs were consistently declining since 2010, but the occurrence of the Covid-19 pandemic caused a sudden hike in prices owing to short labour supply and the imposition of pandemic restrictions. The disruption triggered a huge demand-supply gap.
• The outbreak of the Ukraine-Russia war has created a nail-biting competition between EVs and Conventional vehicles, with prices of fuel for the latter also skyrocketing. The onset of surging carbon footprint, environmental degradation, and changing customer preferences has brought the ball to EVs court.

Battery Prices Expected to Decline in the Upcoming Years

Even though the average cost of Lithium-ion battery cells has escalated from $105 per kWh in 2021 to $160 per kWh in the first quarter of 2022, the EV demand remained unshackled. The freshly proposed price of Lithium-ion batteries of $137 per kWh is anticipated to drop to $92 per kWh by 2024 and $58 per kWh by 2030.?It is noteworthy to witness the enormous reduction of almost 99% in battery’s average cost from $7500 kWh in 1991 to $105 per kWh in 2021.

EVs Demand Remains Unaffected

With a paper-thin battery margin, the automakers are very likely to shoulder the burden of soaring costs to potential buyers. According to EV-Volumes.com,?global EV sales in the first quarter of 2022 sprung by nearly 120% obtaining the 2 million mark.?The number of electric cars being driven globally by the end of 2021 was nearly 16.5 million, three times the amount in 2018.?

Indisputably,?despite the current volatile circumstances, EV enthusiasts haven’t been dissuaded.?The automakers seem to have hit a critical moment among customers, physiological or emotional, where customers have become indifferent to the increasing cost of batteries and EVs. Although the boost might cause a glitch in the long-term trend, technological advancements and wide-scale production is expected to balance out the situation.

Flooding Anticipations

• According to the expert panel, battery costs could stay aloft for another year, followed by probable big investments by automakers and suppliers moving to a variegated range of raw materials, therefore filling for the shortages.
• The automakers are being suggested by the supplier of raw materials to hold up from fixing their prices and wait for another 11-12 months to set their prices once the market becomes stable.?
• Recent reports have disclosed the falling prices of e-batteries by up to 73%, which could bring about a price parity among EVs and conventional vehicles, making EVs equally affordable in the coming years.

In the auto markets of China and a few other countries, it’s striking to see EV demand escalating hastily compared to the relatively low supply of materials for battery making.

Solidify the Growth

According to International Energy Agency (IEA), Electric car sales experienced ginormous growth in 2021 and are maintaining a strong game in 2022 as well. With rising demand, governments and automakers must follow a prudent approach and multiply their efforts to scale down the occurrence of potential bottlenecks, unavailability of mineral supplies, and surging prices. To survive in this go-ahead market and impel the price-conscious buyers to purchase EVs, the manufacturers must focus on operational and maintenance costs, availability of charging stations and purchase price parity with gas-driven vehicles.

Talking about India, the average cost of lithium-ion batteries amounts to approximately Rs 5 lakh, constituting half of the cost of an EV.?To impede the obstacle of expensive EVs and foster growth, keeping in mind the Make in India initiative, India is amplifying battery manufacturing and racing toward creating a manufacturing hub, aided by the growing interest of foreign investors. Although the upfront cost of EVs seems to be more, the long-term benefits can easily overshadow the initial exorbitant costs.?

Summing Up

With 70 million EVs expected to be on the road by 2025, the EV industry is projected to grow at a CAGR of 36% until 2026. Stabilization of battery costs and fixing an accessible price will promote both sales and growth, thereby becoming a stepping stone for the electric auto industry.

Additionally,?with the younger generation getting inclined toward making purchase decisions in favour of EVs, by virtue of their benefits for a green planet, the future of EVs perceives to be bright enough and the?upcoming 10 years are going to be the apogee of EVs flourishing ecosystem globally.?