Electric vehicle sales stay strong globally even as battery prices are soaring
It is a common perception that if battery prices are lowered, the pricing of electric vehicles will be more affordable, eventually improving sales of EVs. However, the sales trend of electric vehicles is proving the perception wrong and staying strong despite soaring battery prices. Also, the demand for electric vehicles is growing around the world despite the surging sticker price of EVs. This is flipping the script of one and half decades created by the conventional ICE auto industry that EV sales would break out only after battery costs drop significantly.
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In 2022, lithium-ion battery cell prices soared to an estimated $160 per kilowatt-hour between January and March, from $105 in 2021. The costs of lithium-ion battery cells surged drastically owing to supply chain disruptions, international economic sanctions on Russian metals and investor speculations as well.
The lithium-ion battery that powers the majority of the global electric vehicle fleet contributes up to 40 per cent of the sticker price of zero-emission vehicles. For example, for a small electric car like Hongguang Mini, which is the bestselling EV in China, the soaring battery costs added almost $1,500, equal to 30 per cent of its sticker price. Still, the EV continues to dominate the overall car market in China.
One of the reasons behind the surging demand for electric vehicles despite soaring battery prices is the price of petrol and diesel is skyrocketing around the world. At the same time, the ICE vehicles' sticker prices too are surging owing to the supply chain disruption, increased logistics costs, etc. The price has been increasing rapidly since Russia invaded Ukraine. The upfront price gap between the EVs and ICE vehicles is narrowing faster than ever. Also, the operational cost gap between EVs and ICE vehicles is widening at the same time.
These are pushing more consumers to buy electric vehicles. Apart from that, environmental concerns and rising options of electric vehicles are also encouraging the buyers to opt for zero-emission vehicles over ICE models, despite the volatile economy. Tightening emission norms, a wide range of subsidies and incentives offered by the governments for the EVs are also encouraging buyers to buy BEVs.
EV-volumes.com claims that global EV sales in the first quarter of this year have jumped nearly 120 per cent. EV makers like Nio, Xpeng and Li Auto delivered record EVs in March 2022. Tesla registered a record 310,000 EV delivery in the first quarter of 2022. The demand for electric vehicles has increased so fast that the EV industry is facing difficulties to match supply with the demand. EV demand is going up faster than estimates, even faster than the supply of raw materials as well.