One thing most consumers can agree on is that electric vehicles are currently too expensive. A small percentage of the population can afford to buy an EV outright, and the industry has depended on government subsidies a great deal to get by.
Costly electric vehicle batteries are largely to blame for this. Electric vehicles run on rechargeable lithium-ion battery packs, which are made using a variety of rare and expensive metals such as lithium, nickel, manganese, cobalt and graphite. However, we may soon see cheaper electric vehicles enter the market as the cost of manufacturing them reduces thanks to decreasing lithium costs, says market analyst Credit Suisse.
At the moment, raw lithium ore goes for a whopping $8,300 a ton. Head of energy resources research at Credit Suisse Saul Kavonic says lithium is experiencing unprecedented scarcity and prices have “gone through the roof.”
These cost increases in raw lithium over the past 12 months, partly due to rapidly rising demand for electric vehicles and temporary energy-storage solutions, have raised battery costs by around 30%.
But prices are expected to reduce as miners build more lithium mines to take advantage of skyrocketing lithium prices. The increase in supply may lead to a drop in lithium prices and cause the price of battery electric cars to go down.
Credit Suisse’s predictions see lithium prices dropping by one-half to $3,470 a ton by the end of next year. Karovic adds that we may even see a surplus over the coming 18 months. Goldman Sachs has also forecast a “sharp correction” in lithium prices in the near future while Macquarie Group believes that EV prices may take longer to lower thanks to rising demand for electric vehicles.
Despite the impact declining lithium prices will have on the nascent electric vehicle industry, Australia’s economy stands to take a hit due to declining mining taxes. It is currently the world’s largest lithium exporter and is poised to triple lithium production in the next four years.
Core Lithium CFO Simon Lacopetta believes that Credit Suisse’s and Goldman Sachs’ price reduction predictions are overstated; the company expects supply shortfalls to result in strengthened prices in the near term. Core Lithium is currently constructing a new lithium mine in Australia. Lacopetta states that the company based the feasibility of its Australia mine on forecasts of lithium ore prices decreasing to $1,000 a ton.
As such, he says, the company should be able to sell into a “fairly positive price environment” and generate healthy margins. As lithium extractors experience healthy margins on their operations, so will manufacturers of electric vehicles such as Mullen Automotive Inc. (NASDAQ: MULN).
NOTE TO INVESTORS: The latest news and updates relating to Mullen Automotive Inc. (NASDAQ: MULN) are available in the company’s newsroom at https://ibn.fm/MULN
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