Lithium Shortages Could Make Affordable EVs Impossible

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Unless you buy your EV from China.

Every major manufacturer is in the process of electrifying their lineups as new emissions regulations draw nearer. We're constantly hearing reports of how these automakers are planning to become all-electric in the future. Kia is the latest to announce such a move, and even London town is getting new electric buses to make navigating the city a slightly less hazardous endeavor for your lungs. However, the disparity between gas-powered car prices and those of EVs is still a major stumbling block to mainstream EV adoption. Various brands have promised to introduce affordable EVs, from Mercedes to Tesla, the latter of which is aiming for a $25,000 EV. But with lithium in short supply, the affordable EV dream may be a very long way away.

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Daniel Clarke, thematic analyst at GlobalData, gives a warning on future EV prices:

"The rising price of lithium demonstrates what many in the industry have warned about for some time: the growing divergence between supply and demand for lithium. Ultimately, this will lead to an increase in the price of EVs, as automakers pass the cost on to the consumer."

China held 80.5% of global lithium-ion battery capacity in 2021, and despite the best efforts of other nations, is expected to remain in a dominant position with an estimated 61.4% of the market share.

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So does that mean that affordable EVs are near-impossible to achieve? Not quite. Clarke says that the rising lithium cost will reach the EV market between 2022 and 2024, and manufacturers will have to make the choice of whether to absorb this cost or pass it on to the consumer.

Since this is a very competitive market where automakers have already invested fortunes, the only way forward is through more vigorous competition, and various marques are working to make deals with lithium miners all over the world to guarantee supply. This sort of competition could have the opposite effect, bringing EV prices down eventually, but the bottom line is that, for now, prices are likely to rise.

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The ongoing semiconductor chip shortage has highlighted the greed of some manufacturers, so don't expect to see an ultra-affordable EV anytime soon. If you want something cheap, you'll have to make do with a Nissan Leaf for now. That said, once more lithium mines are operational (these reportedly take up to seven years to build), we could see a reversal of upward price trends. If Tesla somehow manages to bring us a $25,000 EV next year, everyone else will be forced to find other ways of dropping prices, but don't hold your breath.

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