Automakers are trying to keep up with — or get ahead of — demand, committing tens of billions of dollars to new EV assembly plants and battery factories set to open in the coming years.
But those plants account for only part of the entire supply chain. Materials needed for battery production, including lithium and cobalt, must first be mined and then processed.
Mining capacity for those materials remains limited, particularly in North America. And while businesses and governments have been taking steps to increase capacity, it will be years before new mines can come online.
Meanwhile, raw material prices have soared, in part because of the war in Ukraine. Aluminum, copper, nickel and zinc prices have been at or near all-time highs in recent weeks, leading to higher production costs for battery-makers, according to Fitch Ratings.
“Climbing manufacturing costs, coupled with the lingering autos chip shortage, could curb EV production capacity this year,” Fitch said in an April 1 note. “They could also dampen the ongoing strong momentum of EV sales, should manufacturers pass price increases onto consumers,” particularly when EV credits are not available to consumers.
According to AlixPartners, raw materials costs on EVs in March were significantly higher than for internal combustion vehicles because of higher copper, cobalt, nickel and lithium prices. EVs contained about $8,143 in raw materials content per vehicle in March, compared with about $3,745 per combustion vehicle. Both figures have roughly doubled over the previous two years.