energy insights

Storm Clouds Brewing for American EV Industry

While some optimistic industry watchers believe the price of electric vehicles (EVs) will continue on a downhill march toward affordability, there are others in the supply chain who see storm clouds on the horizon.

Make no mistake, they’re not talking about April showers. Some foresee a tempest that could bring international battery producers to their knees and hold consumers hostage to the whims of a new international energy cartel.

Meanwhile, the Biden administration has boldly called for the electrification of the US vehicle fleet but at the same time shown minimal interest in developing domestic resources that could rewrite the script.

In the midst of all the uncertainty, the market for electric vehicles and the batteries that power them appears to be in a state of flux with conflicting views on where prices are heading.

“While it may not be clear how quickly the average cost of electric vehicles will go down, one thing is nearly certain: the cost of EVs will indeed go down,” states in a recent report. “Automotive experts are almost unanimous in their expectations that EV prices will decline and reach price parity with gas-powered cars in the next few years.”

But others are tapping the breaks and raising caution flags, citing an inadequate supply chain that could choke the industry and gouge consumers.

In an industry analysis published in December, the Wall Street Journal predicts there will be a lithium supply crunch in 2022, forcing EV makers to charge higher prices for their vehicles.

Almost on cue, South Korean battery manufacturers emerged as canaries in the coal mine, sounding alarms that prices for lithium and other critical minerals are skyrocketing, causing them to raise prices on lithium batteries by 10% as we start the new year. They produce nearly half of the world’s rechargeable batteries, but they pay China to supply the refined lithium and other materials they need.

From January 2021 to January 2022, the price of the lithium-rich raw material spodumene rose nearly 500 percent, Benchmark Mineral Intelligence reports.

China is not a major producer of cobalt, nickel or lithium, but the country imports the raw materials from South America, Australia and Africa, and now it enjoys a virtual monopoly on processing those ingredients for EV battery manufacturers around the world. Industry watchers believe the price hikes could erode South Korea’s market share in favor of Chinese battery makers.

Some experts say South Korea needs to decentralize its supply chain. The same wisdom applies to the United States, which seems to be content with outsourcing much of its EV battery supply chain, including lithium, copper and nickel production and processing.

While the Biden administration has issued an executive order calling for EVs to comprise half of all new vehicles sold in the U.S. by 2030, it has shown little interest in producing the resources the country needs to produce its own batteries.

Some groups have been advocating EVs for years, and President Biden is now bearing down on the accelerator. There’s nothing wrong with that as long as his eyes are on the road. But from where we sit, the road is becoming slick, and the American EV industry is in danger of losing traction if supply shortages aren’t addressed.