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Global Demand For EVs Surges Despite Rising Battery Costs

Buyers around the world are lining up to purchase electric vehicles this year even as prices rise. Global EV sales in the first quarter jumped nearly 120%, faster than people thought

The steering wheel and dashboard of the Mercedes-Benz EQS SUV is seen at a Mercedes EV battery factory in Woodstock, Alabama, March 15, 2022. Photo: Elijah Nouvelage, Reuters.


Demand for electric vehicles has surged this year with buyers around the world lining up to buy EVs even as battery costs go up.

The average cost of lithium-ion battery cells soared to an estimated $160 per kilowatt-hour in the first quarter from $105 last year, with costs rising because of supply chain disruptions and sanctions on Russian metals.

For a smaller vehicle like the Hongguang Mini, the best-selling EV in China, the higher battery costs added almost $1,500, nearly a third of the total price.

But gasoline and diesel fuel costs for internal combustion vehicles have also skyrocketed since Russia invaded Ukraine, and experts noted that environmental concerns also are pushing more buyers to choose EVs despite the volatile economics.

Manufacturers from Tesla to SAIC-GM-Wuling, which makes the Hongguang Mini, have passed higher costs on to consumers with double-digit price increases for EVs.

And more may be coming. Andy Palmer, chairman of Slovak EV battery maker InoBat, says margins in the battery industry are already wafer thin, so “rising costs will have to be passed onto carmakers.”

Car makers like Mercedes-Benz will likely shift increases to customers if their raw material prices keep rising. “We need to keep margins,” chief technology officer Markus Schaefer said.

But EV shoppers have so far not been deterred. Global EV sales in the first quarter jumped nearly 120%, according to estimates by EV-volumes.com.

China’s Nio, Xpeng and Li Auto delivered record EV sales in March. Tesla delivered a record 310,000 EVs in the first quarter.


The price of EV battery cells and packs is expected to rise this year for the first time in decades


‘Different Kind of Tipping Point’

“There is a different kind of tipping point that we seem to have hit — an emotional or psychological tipping point among consumers,” said Venkat Srinivasan, director of the Center for Collaborative Energy Storage Science at the US government’s Argonne National Laboratory in Chicago.

He said “more and more people” would buy EVs “notwithstanding the cost of the battery and the vehicle.”

This spike in battery costs could be a blip in the long-term trend in which technology improvements and growing production pushed costs down for three straight decades. Industry data showed that the $105 per kilowatt hour average cost in 2021 was down nearly 99% from over $7,500 in 1991.


Global automakers sold a record 4.8 million battery electric vehicles in 2021, up 113% from 2.3 million in 2020.


Experts say battery costs could stay elevated for the next year or so, but then another big drop is probably in store as big-ticket investments by automakers and suppliers in mining, refining and battery cell production, and a move to diversify raw material sources, tip the balance from shortage to surplus.

“It’s like a bubble – and for that bubble to settle down, it’s going to be at least the end of 2023,” consultant Prabhakar Patil, a former LG Chem executive, said.

British battery company Britishvolt is due to launch battery production at a 45-gigawatt-hour plant in northeast England in 2024. Chief strategy officer Isobel Sheldon said the advice the company is getting from raw materials suppliers is “don’t fix your prices now, wait for the next 12 months and fix the prices then because everything will be on a more even keel.”

“This over-securing of resources should be behind us by then,” she said.


Demand Beats Supply

The industry has long been awaiting the battery cell cost threshold of $100 per kilowatt-hour, as a signal EVs were reaching price parity with fossil-fuel equivalents. But with gasoline prices soaring and consumer preferences changing, that may no longer matter as much, analysts say.

EV demand in China and other markets “is going up faster than people thought – faster than the supply of materials” for EV batteries, said Stan Whittingham, a co-inventor of lithium-ion batteries and a 2019 Nobel laureate.

Concern about the environment and the climate also has motivated buyers, especially younger ones, to choose EVs over those that burn fossil fuels, said Chris Burns, chief executive of Novonix, a Halifax-based battery materials supplier.

“Many younger people entering the market are making buying decisions beyond simple economics and are saying they will only drive an EV because they are better for the planet,” Burns says. “They are making the plunge even though it would be cheaper” to drive a gas-powered car.

“I don’t think we will stop seeing reports trying to show a trend in battery prices down towards $60 or $80 a kilowatt-hour as aspirational targets, but it is possible that those may never get met,” he said. “However, it doesn’t mean that EV adoption will not rise.”


• Reuters with additional reporting by Jim Pollard




China’s NEV Battery Output Soars 207% in First Quarter – Xinhua


Tesla, Others Prepare For Shanghai Factory Restarts


Xpeng Announces Plans to Expand into Sweden, Netherlands


Nio in Talks on Licensing EV Battery Swap Technology – FT


Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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