(The hill) – Battery costs are keeping the price of electric vehicles higher than their gas-powered counterparts, analysts say.
Electric vehicle batteries are usually made from minerals like lithium, cobalt, and nickel which need to be made from minerals that are in high demand.
High costs keep these vehicles out of reach for many Americans, hampering adoption of an important tool in the fight against climate change.
“Batteries are still expensive. They are more expensive than gasoline engines right now,” said Michelle Krebs, executive analyst at Cox Automotive.
Although the price of an electric vehicle can vary, these types of cars are generally more expensive upfront than those that require gasoline.
In July, the average price of an electric vehicle was about $18,000 more than the average car in general, according to Kelley’s Blue Book. The organization has also underline that price disparities can be observed between electric and petrol versions of the same car.
consumer reports found in 2020 that electric vehicles can cost between 10 and 40% more than other similar vehicles. But reports have noted that consumers typically save between $6,000 and $10,000 on fuel and other costs over the course of their electric car ownership.
Several industry analysts told The Hill that batteries are the main source of this difference.
“In any vehicle, the power plant is the most expensive part of the product, and it depends on the raw materials, the refining, the amount of energy and the precision that goes into creating a battery cell and creating batteries,” Carla said. Bailo, CEO of the Automotive Research Center.
Sam Abuelsamid, senior e-mobility research analyst at Guidehouse Insights, said batteries typically make up a third of the cost of the vehicle.
“Battery prices have dropped quite dramatically over the last decade,” he said, “But nonetheless, especially this year, we’re actually seeing battery prices go back up because of a spike of some of the main raw materials needed for the battery.
Electric vehicles are most often powered by batteries made of minerals such as lithium, graphite, manganese, cobalt and nickel.
Abuelsamid said current high mineral prices are a “short-term problem”, adding that demand for lithium is currently increasing, but the mineral is abundant around the world.
“Over the past 2.3 years, as demand for electric vehicles has increased dramatically, particularly in China and Europe and more recently here in North America, demand for lithium has exploded, as have prices,” he said, noting that nickel prices also increased after Russia invaded Ukraine since some of the nickel comes from Russia.
But EV battery prices over the next few years could drop “because we’re developing new sources of lithium…and we’re also moving into different battery chemistries that use more accessible and affordable materials.”
He predicted EV prices could be in line with gasoline cars in 2025 or 2026.
Bailo said another factor in the high prices of electric vehicles is that there are fewer of them, so some costs for automakers are spread over fewer cars and companies can’t get such favorable rates from their suppliers.
Many electric vehicles are also made by luxury brands, or one company will make its most expensive models electric, which means they can be more expensive than an average car.
Cox Automotive’s Krebs said that for just about any new automotive technology, “it always starts on more expensive cars and then goes down as the volume goes up and they find ways to make it more affordable.”
Democrats, meanwhile, said their new Cut Inflation Act should help lower costs for consumers, with tax credits of up to $7,500 for electric vehicle purchases.
But credit comes with certain stipulations that can be very difficult to adhere to, at least in the short term. Half of the credit — $3,750 — will depend on where the minerals in the battery come from, which will require a certain increasing percentage to come from countries where the United States has a free trade agreement. The other half of the credit will be based on battery component manufacturing in North America.
Experts say the mineral requirement will likely disqualify most cars in the short term, making credits less effective, but could help shore up an American or US-friendly supply chain in the long term, and make the country less dependent on places like China.
“What they’ve come up with, in the long run, will actually probably be better because it will incentivize…localizing the production of battery materials so we’re not shipping products all over the world,” Abuelsamid said. “But, in the short term, the program as it is now was clearly structured to appease Joe Manchin.”