It has long been argued that one of the major obstacles to the mass uptake of electric cars is linked to the production cost of batteries. A price that remains too high, inevitably feeding through to the list price and placing most plug-in vehicles beyond the reach of many buyers. The good news is that the trend has been falling for years, with a further minus 6 per cent recorded between 2020 and 2021; but the bad news is that the economic climate risks pushing prices upward in 2022, a development that could have repercussions on the future plans of many car manufacturers.

Full competitiveness hinges on reaching $100

The picture is outlined in the annual battery cost survey conducted by Bloomberg new energy finance (Bnef): in 2021, prices for lithium-ion batteries averaged $132 per kilowatt-hour, down from $140 the previous year. But rising raw material prices — which are also having a heavy impact on energy bills — are already pushing costs higher: in 2022, the average could reach $135.

It is worth highlighting that there is one figure most analysts agree on: $100, regarded as a kind of milestone for making the production costs of an electric car competitive with those of a conventional vehicle. A target that had seemed within reach and that now risks receding, with the result that the long-awaited cost parity could be delayed by a couple of years.

Electric and conventional cars: will cost parity slip to 2024?

From 2022, the goalposts would shift to 2024, owing to supply chain problems affecting raw materials: this is the case with nickel, but also with iron phosphate and lithium. For several months now, many major car manufacturers — including Tesla — have been considering the possibility of using lithium iron phosphate batteries across their entire model range, precisely because of difficulties in sourcing nickel; but as far back as last September, Chinese lithium iron phosphate cell manufacturers raised prices by between 10 and 20 per cent.

There is therefore a risk of a sharp halt to a virtuous process that had seen, compared with $1,200 per kilowatt-hour in 2010, a cost reduction of nearly 90 per cent in just ten years. There is now great anticipation over whether this will have repercussions on the plans of many brands, which had foreseen a decisive shift to electric vehicles in short order. All the more so given that major bodies, such as the United States Department of Energy, put the real economic break-even point for electric vehicles versus internal combustion ones not at $100 but at $60 per kilowatt-hour.