In 2023, lithium chains a constant price drop. For what is this? What are the consequences for the electric car? Will it be cheaper in the future?
The experts already anticipated it before the end of 2022: lithium would lower its price this year by up to 25%. The forecasts are not only coming true, but in this first quarter of 2023 they have even been exceeded. But, what is the reason for the drop in the price of lithium? What are the consequences for the electric car? Is it going to be cheaper in the coming months? We analyze it.
Only in the month of January, the price of lithium fell by 20%, reaching almost 30% a month later if we compare the prices of lithium carbonate in November of last year, when it reached a price of 81,300 euros. per ton, compared to the 40,700 euros for which it was sold last month.
And it’s not just the price of lithium that has fallen. Other materials used to make batteries, such as cobalt and copper, have also become cheaper. Specifically, cobalt is selling for less than half that of a few months ago, while copper is down around 18%.
What is the reason for this drop in the price of lithium?
China is the main market for lithium globally, since it concentrates most of the production of batteries that use this element. In 2022, there were several occasions when the value of lithium skyrocketed and, consequently, the cost of producing batteries for electric cars increased.
By comparison, in 2021 the price of lithium stood at the barrier of 100,000 yuan (13,600 euros), so 2022 was a real bubble for one of the basic elements present in the cells of most batteries, not just electric cars, but also electronic devices such as smartphones or laptops.
However, between December 2022 and February 2023, its value has been reduced by almost 30% and this is mainly due to the drop in demand for electric vehicles in the Chinese market, despite the fact that in December sales increased by 90%.
And it is that, between 2009 and 2022, China has encouraged the purchase of electric cars through official aid and subsidies, which has encouraged high sales of this type of vehicle.
However, the end of this government incentive program was announced last year, causing an acceleration in sales in the last months of 2022 before a 6.3% drop in January of this year.
Countries like Norway or Germany also ended their aid programs for the purchase of electric vehicles in December last year, which has contributed to the drop in demand.
This situation has also fostered a price war between the main lithium extracting companies worldwide, which is causing a significant drop in the value of this material so far in 2023, with forecasts that it will continue to drop in the coming months.
What consequences does it have for the electric car?
The lower the value of a material, the lower the cost of production. This does not only apply to the electric car, but it is something that happens in any type of market. Therefore, car manufacturers are buying lithium at a lower price than they did just a few months ago, which should imply a reduction in costs and, therefore, a drop in the price of the final product.
We have already witnessed how some brands are lowering the price of their electric cars. The most active firm in this regard is Tesla, which has been chaining price reductions for some months now, which has allowed you to buy a new Tesla Model 3 today for 39,900 euros without counting the aid from the MOVES III Plan.
But, for the moment, this is not the trend in the electric car market. With the exception of Tesla and Ford, which also lowered the price of the Mustang Mach-E, few more are the companies that are reducing their salaries, which translates into an increase in their profit margins, that is, they earn more for each car. electrical they sell.
