Cobalt, nickel and lithium prices shape the cost of producing these cathodes. All three rose sharply in price in 2022 before falling rapidly this year in response to weakening demand. The weakened demand was partially a response to reductions in subsidies in China and Germany, analyst Alice Yu said.
LFP cathodes trended lower in costs across that time period than NMC cathodes because they do not depend on nickel and cobalt, which are both rare and difficult to extract. Overall, lower prices this year have spurred a wave of global EV price cuts, Yu said.
The Biden administration has focused on building up domestic EV supply chains, down to the level of minerals. The Inflation Reduction Act, American Battery Materials Initiative and the Bipartisan Infrastructure Law have been particularly significant in incentivizing both supply and uptake of EVs with supply chains based in the U.S., according to Evans.
An increasing number of automakers are looking to source batteries in house. S&P Global Mobility expects in-house sourcing to grow to 70 percent in 2030 in North America from 12 percent of battery manufacturing in 2022 — a much more significant increase than in Asia (35 percent from 33 percent in China, 37 percent from 21 percent in Japan and Korea) or Europe (46 percent from 8 percent).
Material costs will likely remain volatile, but nonmaterial costs can be reduced as manufacturers ramp up production and achieve economies of scale, said Sam Wilkinson, director for clean technology and renewables at S&P Global Commodity Insights.
“Overall, we see strong cost reductions for batteries in the long term,” Wilkinson said.
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