The big picture: the prices of raw materials needed for the production of electric vehicles have fallen sharply since January. The situation has puzzled some analysts, who fully expected that electric car prices would remain high or even rise, which would actually slow down the transition from internal combustion engines to electric-powered engines.
According to supply chain analyst Benchmark Minerals, the price of lithium used in batteries for electric vehicles has dropped by almost 20 percent since January (as of March 20). Copper, which is found in both batteries and electric car engines, has fallen in price by about 18 percent over the same period. The price of cobalt, another main material in batteries, has halved since the beginning of the year.
Savings are already trickling down to consumers. Tesla recently implemented its fifth price adjustment for 2023, lowering the prices of two of its most expensive electric vehicles to make them available to more buyers. The Model S and Model S Plaid have become $5,000 cheaper after the latest cuts. Meanwhile, the Model X SUV received an even bigger discount of $10,000.
Kelley Blue Book data shows that the average selling price of an electric car in the United States fell by $1,000 from January to February.
“People’s desire to own Tesla is extremely great,” Tesla CEO Elon Musk said during the company’s investor day earlier this month. “The limiting factor is their ability to pay for Tesla,” he added.
Others expressed similar feelings. Kang Sun, CEO of battery startup Amprius Technologies, told The New York Times that cost is now a major obstacle for electric vehicles. Sun specifically mentioned lithium as a commodity that could boost sales of new electric vehicles.
The reasons for the price drop are being discussed. Some point to a slowdown in sales growth in China and Europe after the end of subsidies for electric vehicles. Others believe that the new mines and processing plants being put into operation are helping to ease restrictions on the supply of materials such as lithium, but if this is the case, it may be resolved in a timely manner, since it is expected that by 2050, the demand for lithium will increase 42 times to support the planned transition to clean energy.