Surging Lithium Price Will Not Impede the Electric Vehicle Boom

Lithium-ion batteries (LIBs) play a key role in the energy transition as the primary energy storage device in mobility and renewable energy systems. Of the diverse materials that comprise a LIB, many—such as lithium, cobalt, and nickel—are considered “critical” due to their high supply risk and importance to product performance. A low-carbon future, therefore, depends considerably on their supply stability.

Contrary to anticipation, the global LIB supply chain is currently haunted by market fluctuations. From December 2020 to April 2022, the Chinese spot market has seen a price increase by 830% for lithium carbonate, 100% for cobalt sulfate, and 60% for nickel sulfate, with their per-ton prices rising to $73,000, $18,000, and $7,000, respectively. Skyrocketing costs were transmitted downstream as raw material suppliers were powerless over such huge surges. That made the cathode price increase by 140% for LiNi_0.8Co_0.1Mn_0.1O₂ (NCM-811) to $64,000/ton and 330% for LiFePO₄ (LFP) to $25,000/ton, and electrolyte price increased by 160% to $17,000/ton. The collective impact prompted an increase in LIB price in the second half of 2021, reversing its 30-year decline that began with the first-ever commercial product in 1991. In April 2022, prices of NCM and LFP prismatic electric vehicle (EV) battery cells reached $130/kWh and $120/kWh, respectively, 30% and 50% higher than their pre-surge levels. To respond, many EV companies inflated retail prices, typically by 3%–5%, or even discontinued the sales of low-profit EV models, e.g., the Great Wall Ora.

The surging prices of materials, especially lithium, have stirred up wide concerns about future EV development. In this commentary, with a focus on lithium, we argue that although the current price spike gives the EV market a sharp short-term shock, it will not hinder transportation electrification in the long run. Despite tight supply and high-point price fluctuation of lithium, the EV market is expected to maintain steady growth for the next few years. By around 2025, with a significant lead of supply over demand, lithium price is likely to fall back to its pre-surge level.