Sales of electrified cars – full-electric and plug-in hybrids — doubled globally in 2021 to 6.6 million, but that rapid growth has further stretched supply chains already threatened by the pandemic and Russia’s war in Ukraine, the International Energy Agency said in its annual electric vehicle outlook report.
Essential materials such as lithium, nickel and cobalt are particularly at risk, the IEA said, noting that prices for lithium – an essential component of EV batteries – were seven times higher in May than they were at the start of 2021. Cobalt prices more than doubled, and nickel prices almost doubled.
That surge was a result of “unprecedented” battery demand and “a lack of structural investment in new supply capacity,” the report said.
That has had a direct impact on the price of batteries, which make up about one-third of the cost of new EVs. Battery prices fell by 6 percent to $132 per kilowatt in 2021, a slower rate of decline than 2020’s 13 percent, the IEA said.
“Policy makers, industry executives and investors need to be highly vigilant and resourceful in order to reduce the risks of supply disruptions and ensure sustainable supplies of critical minerals,” IEA Executive Dirctor Fatih Birol said in a news release.
The agency said that continued high prices for metals could mean an increase of up to 15 percent in battery prices this year – potentially further delaying cost parity between electric cars and internal-combustion engine vehicles, seen as a key tipping point in EV adoption.
“Pressure on the supply of critical materials will continue to mount as road transport expands to meet net zero ambitions,” the IEA said, adding that new short-term investments were needed in mining, especially for lithium. Global demand for lithium is expected to rise by 600 percent by 2030, requiring 50 new average-size mines, the report said.
EV technology can potentially adjust to increasing raw materials prices, the IEA noted, especially battery cathode chemistries and an increase in recycling.
Other findings from the annual report:
- Average range of full-electric cars increased to 350 km, a 3.5 percent increase over 2020, but lagging the 9 percent annual growth rate since 2015. The average plug-in hybrid battery-only range was just over 60 km, an increase of 8.5 percent over 2020, as plug-in gained larger batteries to drive down their CO2 emissions.
- As sales increased, European government spending on electric vehicle subsidies went from $3 billion in 2019 to $8 billion in 2020 and $12.5 billion in 2021, with an average of about $5,500 per car.
- The average price for a full-electric car in Europe was about $48,000, and $58,000 for a plug-in hybrid. Electric cars (including plug-in hybrids) are about 45 to 50 percent more expensive than internal combustion cars.
- By 2030, Europe could see a reduction in fuel tax revenue of $35 billion – the largest net loss by region — as cars switch to electricity from diesel and gasoline.
Electric vehicles are having a positive impact on greenhouse gas emissions, the IEA said. Last year, EVs were responsible for a net reduction of 40 million tons of greenhouse gases on a “well to wheel” basis (compared to what would have been emitted by internal-combustion vehicles – a figure that the IEA said was equal to Finland’s entire energy emissions.
As more renewable energy sources come online and more EVs are sold, that figure will accelerate to up to 460 million tons in 2030.