It might appear to be an excellent time to buy an electric vehicle. Gas prices are high. There’s a climate crisis. Every major carmaker is in the process of pivoting to the mass production of EVs. Sure enough: Consumer interest in electric vehicles has jumped over the past few months, even amid the broader inflation afflicting the economy in general and car prices in particular.
But a few issues have held off an actual EV-buying boom. There aren’t enough electric cars, owning them is suddenly more of a hassle than it used to be, and EV prices, with some exceptions, are going up. Tesla’s Model 3, its cheapest vehicle, now sells for $46,990, an almost 25 percent jump from its February 2021 price; GM, meanwhile, has added $3,000 to the retail price of its upcoming electric SUV, the Cadillac Lyriq.
As manufacturers hike up their price tags, industry observers are predicting that EVs will get still more expensive in the near term, as will their usually cheap batteries. What’s going on? And what does it have to do with minerals? Join me on the road to understanding.
Fading Tax Credits
Many electric car, truck, and bike models were price-y even before the COVID pandemic throttled the economy (although their ownership costs over time are still cheaper than those for combustion engine models). Proposed legislation to extend consumer tax credits for these vehicles appears to be all but dead for now. Some companies helped by the existing $7,500 tax credit, like Tesla and GM, have produced enough EV models that their products are no longer eligible for this write-off.
Different states do have different incentive programs for EVs. Take California, which offers additional tax rebates for EVs and is piloting programs to have electric cars serve as home power sources. That, of course, disadvantages drivers in states without such incentives. This is an additional burden when it comes to car dealerships, which have often hiked up prices for their wares—including popular EVs—by imposing hefty additional dealer markups on their stock.
The Whole Electricity Part
Normally, homeowners with EVs have the ability to charge their cars at their houses, or to take advantage of power-use efficiency provided by load sharing, or even to use their cars to feed energy to their houses—all of which helps save time, energy, and money. But the combination of oil-price surges and general supply-chain shocks have caused utilities everywhere to hike energy prices for home use. As a result, it’s become more expensive to charge cars at home. Beyond cost surges, utilities that still bank on natural gas are actively making it harder for homeowners to electrify or decarbonize their residences through tech like rooftop solar or battery storage.
If you want to charge away from home, there aren’t nearly enough public EV chargers available for drivers who need to watch their power use while out and about. There are innovations being made to ease public charging access, whether through fast-charging stations installed on roadways or on public roads that will charge your car while you drive on them. But such creative solutions can only go so far when energy providers are still charging prices up the wazoo. Supply just isn’t reaching demand here.
Remember the computer chip and semiconductor shortage? Well, that unfortunate effect of the pandemic’s supply shocks is still happening. Those parts, which are essential for EVs—according to Politico, an electric car requires about twice as many chips as a gas car—are preventing automakers from sufficiently ramping up manufacturing to meet demand. Some companies claim they’ve already sold out their most popular EV models, leading to delays. Not to mention, war-torn Ukraine is usually a significant source of neon, the gas that helps power the laser tech used to make semiconductors.
Other car tech is also in trouble. Russia’s invasion of Ukraine led to corporate flight from both countries and shifted automakers’ business incentives. German companies stopped manufacturing cars in Russia, while the attack on Ukraine disrupted its production of wiring systems—of which it was a major source. No cars, whether gas-powered or electric, can function without those wire systems, so other nations will have to make up for that lost capacity.
And the Big One: Batteries
The most important culprits are beloved metals like lithium, nickel, and cobalt, on top of rare earth elements.
Although there are EV batteries made of different materials that are relatively cheap and scalable, lithium-ion and lithium-iron phosphate batteries are used most, and they require all the aforementioned metals. While their wide-scale adoption within the EV and energy-storage markets has helped depress their price, lithium batteries have long faced structural burdens now exacerbated by the current economic situation. Not convenient when the battery alone makes up anywhere from one-quarter to one-third of an electric car’s price.
China, whose land is rich in mineral deposits, was responsible for 90 percent of battery manufacturing last year. It already cost a lot to ship uniquely heavy EV batteries (which are even more massive for e-trucks) to the rest of the world before the Trump administration slapped tariffs on them in 2018 as part of its trade war with China. Though the U.S. government later slashed these tariffs in half, they’re still in effect, to automakers’ chagrin. American car companies are now investing in building and expanding battery-manufacturing facilities stateside so as to avoid these international trade costs, while also turning to domestic lands for metals.
Russia is again a problem, having once served as the source for 20 percent of the world’s supply of battery-suitable nickel. Following this year’s slew of international sanctions, Russia’s nickel sources were essentially closed off, driving up the metal’s price; the U.S. has little nickel of its own. Meanwhile cobalt, primarily mined from the Congo and shipped through South Africa, also saw price hikes due to supply-chain struggles and civil unrest within both countries.
Despite all this, some forecasters are optimistic: Goldman Sachs has predicted that as more mines are built to retrieve these metals, an ensuing supply glut will lead to a crash in their prices over the next couple years. And although mine construction is controversial for its land-use impacts, innovators are testing alternative solutions, like using special magnets to fetch lithium from seawater, industrial waste, and geothermal plants. Should such tech work on a scalable level, lithium supply could expand immensely—and maybe drive down electric vehicle prices.