Because of a global jump in raw material prices, primarily lithium, Tata Motors, India’s top-selling electric manufacturer, stated the cost of battery cells had climbed by roughly 20%, placing pressure on the company in the short term.
Cell prices have been growing for months, according to Shailesh Chandra, managing director of the passenger vehicles and electric mobility subsidiaries, and he expects them to remain high for roughly a year.
“Immediate impact seems to be about a 20% kind of an increase which will have short-term pressure. This should moderate within a year and then start coming down,” he said.
Chandra would not say whether this would have an impact on the company’s sales or profitability, but he did say that demand for “green personal mobility” was on the rise, and that he intended to offset some of the expenses by expanding the use of locally produced components in the automobiles.
As demand outstrips supply, automakers around the world are facing inflationary pressures due to rising costs of nickel, cobalt, and lithium, which are needed in creating batteries, the most expensive portion of an electric vehicle (EV).
This has been exacerbated by Russia’s invasion of Ukraine, according to analysts, which threatens to halt the downward trend in battery prices, which might stymie EV adoption, particularly in price-sensitive economies like India.
Electric cars account for only 1 per cent of total car sales in India’s embryonic EV sector. The primary reasons why there are few takers and why more carmakers have yet to debut electric vehicles are high battery pricing and an insufficient charging network.
According to statistics from industry forecaster Benchmark Market Intelligence, spot prices for lithium carbonate, which is commonly used to create lithium-ion batteries, soared to over $70,000 per tonne in March 2022, up from under $10,000 a year earlier.
“Going forward this inflationary impact is expected to continue,” said Manish Dua, senior analyst at Benchmark.
Tata recently increased the price of its Nexon electric SUV in India by over $300, a 2 per cent increase for the base model, following similar movements by Tesla Inc and BYD in other countries.
Despite this, Tata, which controls over 90 per cent of India’s electric car market, anticipates sales of its electric cars to more than quadruple this fiscal year, compared to 4,200 units last year.
Tata AutoComp Systems, which has a joint venture with China’s Guoxuan Hi-Tech to create lithium-ion batteries, is the EV maker’s lithium-ion battery supplier.
According to Chandra, as the battery recycling industry grows, more raw materials will become available outside of mines, alleviating some of the economic concerns.
“Short term spikes will happen. It is good to focus on the secular long term trend which will keep going down,” he said.
(Adapted from HindustanTimes.com)