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Electric automakers will have to adjust to rising battery material costs, Goldman says

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A GM employee poses with an example of the company’s next generation lithium metal batteries at the GM Chemical and Materials Systems Lab in Warren, Michigan on September 9, 2020.

Steve Fecht | General Motors | Handout | via Reuters

BEIJING – Growing demand for electric car batteries will drive up prices for key materials, Goldman Sachs analysts said in a March 18 release.

This, in turn, will increase battery prices by about 18%, which will impact the overall bottom line for electric car manufacturers, as the battery accounts for about 20% to 40% of vehicle costs, according to Goldman analysts.

While the report did not set specific price targets for the raw materials, the analyst model forecast that a return to historic highs would more than double lithium costs for electric battery manufacturers. That of cobalt would also double, while the cost of nickel would increase by 60%.

A new type of battery

The limited availability of nickel, which is suitable for car batteries, could even accelerate the switch to a different type of battery called lithium iron phosphate (LFP), the report said. Tesla and the Chinese start-up Xpeng are among the automakers who are already using this type of battery, which uses no nickel or cobalt but stores relatively less energy.

If nickel prices hit their all-time high of $ 50,000 per ton, that could add $ 1,250 to $ 1,500 per electric vehicle, which could hurt consumer demand for the cars, the analysts said.

Ultimately, the growth of the electric car industry and the demand for battery materials depends on how many vehicles people buy. The tipping point for consumers to switch from gas-powered vehicles to electric cars is generally expected when battery costs are down enough.

That shift could take place in the next decade. Goldman predicts that battery costs will fall below internal combustion engines in 2030.

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Katherine Clark