News Treehugger Voices Will Lithium Prices Kill Demand for Electric Cars? Prices have increased by 500% in the past year. Car prices will follow. By Lloyd Alter Lloyd Alter Facebook Twitter Design Editor University of Toronto Lloyd Alter is Design Editor for Treehugger and teaches Sustainable Design at Ryerson University in Toronto. Learn about our editorial process Published March 30, 2022 09:49AM EDT Fact checked by Katherine Martinko Fact checked by Katherine Martinko Twitter University of Toronto Katherine Martinko is an expert in sustainable living. She holds a degree in English Literature and History from the University of Toronto. Learn about our fact checking process Prices in big electric vehicles are going up. Ford Share Twitter Pinterest Email News Environment Business & Policy Science Animals Home & Design Current Events Treehugger Voices News Archive "Demand destruction" is a term being bandied about a lot these days. Investopedia defines it: "In economics, demand destruction refers to a permanent or sustained decline in the demand for a certain good in response to persistent high prices or limited supply. Because of persistent high prices, consumers may decide it is not worth purchasing as much of that good, or seek out alternatives as substitutes." Investopedia notes the term has most often applied to energy commodities and related goods. "For instance, persistently high gasoline prices can lead households to purchase smaller, more gas-efficient cars or switch to electric vehicles." In fact, according to James Thornhill of Bloomberg, demand destruction may hit electric cars because of the rising price of lithium carbonate—a key ingredient in the batteries that are the most expensive part of electric vehicles (EVs). Battery prices have been dropping consistently for years as the manufacturers got better at it and the designs improved, but that appears to be over thanks to the fivefold increase in the price of lithium in the last year. American bank Morgan Stanley notes in a report: “Historically, the battery price cost curve had been declining at a pace of 3% to 7% annually for so many years in a row it almost seemed inevitable,” the analysts said. “But molecules don’t play by the same rules as Moore’s Law. The world has changed, and along with it is a new paradigm of input costs.” This is a particularly big problem in China where battery manufacturers buy on the spot market, unlike Tesla which Morgan Stanley says can weather this storm. It still writes that overall electric car prices could rise by 15% as manufacturers pass through the increased costs. Meanwhile, Tesla founder Elon Musk notes his companies are getting hit by inflation pressure on raw materials and logistics. He continues: "And we are not alone." And it is not just lithium: Nickel is a big part of batteries, and its price has doubled because of the war in Ukraine; Russia is a major supplier. Quartz reports, "The war in Ukraine is causing commodities with Russian exposure to surge, and the price increases could spell trouble for electric vehicle (EV) manufacturers already struggling to keep costs down in the face of supply chain disruptions." "Rising raw material prices certainly have the potential to delay the timeline on cost parity between EV and ICE vehicles, which could hamper the wider adoption of EVs," analyst Gregory Miller told Reuters, in reference to market-dominating ICE vehicles. And then there is cobalt, which Green Car Reports says is surging in price. Inside EVs quotes a study claiming that "by the end of 2022, the price of raw materials that go into some EV battery packs could go up by as much as $8,000 per vehicle." Of course, there is a solution to this problem: Make electric vehicles lighter and smaller. GMC The bigger and heavier the car or pickup truck, the bigger the battery, and the bigger the cost increase. Blake Shaffer of the University of Calgary made some suggestions in a study, published in Nature, and covered in Treehugger: Tax heavy cars. This will annoy those who believe we should be doing everything possible to promote electric vehicles, but charging fees on the basis of vehicle weight might discourage the purchase of heavy vehicles. Shrink batteries. Shaffer notes that most trips are short, far less than the maximum range of batteries, so why push around all the extra weight?Drive less. "Policies should ensure that alternatives such as walking, biking and public transport are safer, more convenient, accessible, affordable and reliable. Urban designers should consider the impacts of zoning and development on driving patterns to minimize average distances traveled." Lloyd Alter But the market may do this anyway; a Nissan Leaf has a battery that's just over a quarter as big as a Ford Lightning, and the increase in cost will be proportionately less. The auto companies might have to pivot the way they did in the '70s and stop making giant pickup trucks and move to cars as small as the VWs and Tesla Model 3s. I have often complained about the weight of these vehicles. From an earlier post, "Do Size and Weight Matter in an Electric Car?": "When I wrote about the Tesla Model X being too heavy to cross the Brooklyn Bridge, I got lots of comments like, 'This is the most verbose piece of simplistic "writing" I have read in a while. And why a site called "treehugger" should be complaining about electric cars is beyond me.' But weight actually matters a lot. Making steel, aluminum and batteries all cause environmental degradation and carbon emissions. Making electric cars heavier means they consume more electricity, which has an environmental cost however it is made. Heavier cars produce more particulate emissions, even when they are electric, from tire wear and non-regenerative braking. The amount of stuff we use to make things matters." And now we are finding the amount of stuff we use significantly affects the cost of these vehicles. It's time for a rethink and a resize, or the electric car market might suffer significant demand destruction. And of course, I have to note that it's time for an e-bike.