Raw material costs for electric vehicles (EVs) have more than doubled during the coronavirus pandemic, forcing giant automakers as well as start-up companies to significantly raise vehicle prices.
The Impact on the EVs’ Manufacturing Industry
A recent outlook of the global automotive industry published by the consulting firm AlixPartners highlights that the average raw material cost for an EV has gone up 144% from $3,381 per vehicle in March 2020 to $8,255 per vehicle in May 2022. The cost increase was led by materials such as cobalt, nickel, and lithium, which are all essential for making batteries that power electric cars and trucks.
According to the report, EV-specific costs have increased from around $2,000 to $4,500 over the past two years as well. However, the cost increases are not limited to electric vehicles. Raw material costs for conventional internal combustion engine vehicles have also roughly doubled in this period to $3,662 per vehicle, a 106% increase from the average of $1,779 per vehicle in March 2020, as cited by increases in steel and aluminum.
Price Increase Slows Down the Adoption of EVs
The cost spikes come as automakers are preparing to launch new EVs over the next couple of years. AlixPartners predicts that the number of EV models available in the global market will grow from 80 last year to over 200 by 2024. However, AlixPartners expects higher costs to translate into a relative slowdown in EV adoption as automakers refrain from rushing EVs to the market and refocus on profitability instead.
Meanwhile, car manufacturers are raising prices for buyers. Giant automakers like General Motors and Tesla, as well as start-ups like Rivian and Lucid, have been impacted.
Last June, General Motors also announced that it would raise the price of its electric car model by $6,250. The automaker blamed higher prices for parts, engineering, and logistics. Tesla, Rivian, Lucid, and others previously announced notable increases in the cost of starting their EVs as well.
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