The secret to affordable electric vehicles is cheaper batteries. But after years of falling prices, battery costs are now headed in the wrong direction.
Why it matters: Costlier batteries could drive up the price of electric vehicles — threatening the auto industry's transition away from fossil fuels, and, in turn, society's fight against climate change.
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Driving the news: Soaring costs for minerals and other raw materials could push the average price of a lithium-ion battery pack to $135 per kilowatt-hour in 2022, according to researchers at BloombergNEF who specialize in studying the energy transition.
The projected 2.3% hike would mark the first price increase in a decade.
What they're saying: "This creates a tough environment for automakers, particularly those in Europe, which have to increase EV sales in order to meet average fleet emissions standards," says James Frith, BNEF's head of energy storage research, per Bloomberg.
"These automakers may now have to make a choice between reducing their margins or passing costs on, at the risk of putting consumers off purchasing an EV."
What's happening: Electric vehicles are about to flood dealer showrooms.
Last year, there were just 24 EV models for sale in the U.S.
By 2025, consumers will have 146 EV models to choose from, according to IHS Markit's forecast.
Yes, but: High sticker prices, along with worries about the availability of charging stations, are still obstacles to public acceptance.
Automakers have responded by introducing cars with a longer driving range — which requires a larger battery.
Where it stands: Battery pack prices have been falling steadily since at least 2010, when the average cost was $1,200 per kilowatt-hour.
The latest data shows battery prices fell another 6% from last year, to $132 per kilowatt-hour.
The industry has been aiming for $100 per kilowatt-hour, which would put the purchase price of an EV on par with their gasoline counterparts.
What to watch: BloombergNEF says that $100 target is still possible by 2024 but could take a few years longer because of the higher commodity prices.
Editor's note: This story was originally published on Dec. 1.
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