The rise in the cost of battery materials may put the brakes on EV adoption, which has been growing at a robust pace.
Battery Material Prices Escalate: In February, cathode materials such as lithium carbonate and lithium hydroxide saw price increases of 452% and 510%, respectively, as compared to a year ago in Greater China, BofA Securities analyst Jessie Lo said in a note on Monday.
The analyst noted cathode prices for nickel cobalt manganese 523 (NCM 523) and lithium iron phosphate (LFP) batteries spiked 98% and 235%, respectively.
Cathode and its upstream, the analyst said, saw the biggest cost hike among all materials and therefore cathode makers are facing significant cost pressure from the material price hike.
The price of anode products remained largely stable, Lo noted. On electrolyte, the analyst stated the price of both NCM 523 and LFP battery remained flat month-over-month in February.
Lithium carbonate prices have stabilized at about 500,000 yuan ($78,465) per ton in the third week of March amid improvement in the supply-demand gap, the analyst said, citing RealLi Research. Prices will likely remain stable around the current level throughout 2022, putting cathode supply at risk, the analyst said.
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EV Sales At Risk: Battery makers have begun discussing the next round of price hikes with their clients, Lo said. In 2021, the cost increases were largely borne by battery manufacturers, the analyst added.
Auto OEMs/EV manufacturers and those companies downstream may have to bear the input cost inflation in 2022, Lo said. Already in the first quarter of 2022, automakers/EV manufacturers have raised retail EV prices or canceled discounts or promotions to reflect the higher battery material costs, the analyst noted.
"Given material prices continue to trend higher amid tight supply, including but not limited to battery, chips, etc, auto OEMs are likely to raise retail prices again in 2Q22," the analyst said.
Such price passthrough to end-consumers could lead to a negative impact on demand and overall EV sales expectation for 2022, the analyst added.
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