EV component costs rise

Industry

Heightened raw materials costs, supply chain difficulties and shortages of key materials have sent prices for electric vehicle components rising over the last two years.

That has delayed the industry’s quest to bring prices of EVs in line with those of gasoline-powered vehicles by at least a couple of years, said Jamie Fox, principal analyst at Interact Analysis.

Depending on segment, price parity might have been achievable in 2025 or 2026 on the trajectory before the supply-chain challenges and disruptions of the last two and a half years.

Fox now expects 2030 to be a more reasonable timetable for many vehicle segments.

“It’s just harder to get things done, and if demand for EVs is the same, people will start to pay more for EV components,” Fox said.

The industry has long sought price parity between EVs and gas-powered vehicles. EVs typically cost thousands of dollars more than their internal combustion engine counterparts, pricing many mainstream vehicle consumers out of the market unless they have access to government subsidies.

“Cost points are going to matter for the mass market,” said Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners.

The events of the last few years have done little to help that cause. Costs for raw materials such as lithium, nickel and cobalt that go into EV batteries and other components have surged from pre-pandemic levels as demand skyrockets and as the industry works through supply chain and shipping challenges.

Meanwhile, the ripple effects of the COVID-19 pandemic, inflation and the war in Ukraine have sent prices of other EV components rising as well. According to Interact Analysis, the average price of a motor for BEVs, fuel cell EVs and hybrids rose 26 percent in 2021 and is expected to rise again in 2022. Prices for e-axles, inverters, battery management systems and more have also risen considerably.

While batteries account for a large share of any EV’s given costs, determining an EV’s price is much more complicated than simply looking at the price of raw materials such as lithium, said Michael Robinet, executive director of Automotive Advisory Services at S&P Global Mobility. That’s particularly true since most automakers have yet to build EVs at a mass scale.

“Other than maybe a couple of OEMs, there aren’t a whole lot of OEMs that have reached any level of scale in battery electric,” he said.

That’s beginning to change as EV demand rises and as more electric vehicle assembly and battery pack production comes online. EVs, in fact, are now often selling above targets set by most automakers, a change from just a couple years ago, when Tesla was the only automaker to hit those targets in the U.S., Wakefield said.

“It’s changed the dynamic 180 degrees on planning for future volume,” he said.

Many of today’s EV models have been “over-engineered” by established automakers looking to make sure they know what they’re doing as they shift to electric vehicles, giving the industry a chance to save significant amounts on future models, Wakefield said.

“The idea of thousands plus dollars being really line of sight and readily available is an unusual world for automakers to look at, but that’s the reality,” he said.

There is no consensus industry view on when EVs will reach price parity with internal combustion engine vehicles, Robinet said.

“You have some OEMs that are all in and are focused on reducing costs as much as they can, and then you have others that are taking more of a wait-and-see approach and are standing back, waiting for the dust to settle,” he said.

One of those latter automakers appears to be Renault Group, which does not see price parity coming anytime soon, CEO Luca de Meo told reporters at the Paris auto show. Renault, which plans to become an electric-only brand by 2030, expects the price of the EVs it offers to remain higher than combustion models of the same size because of battery prices.

“I can come up with better battery chemistry and better power electronics, but these gains would be erased when the price of cobalt doubles in just six months,” de Meo said.

The cost of batteries will remain a difficult issue for the industry, Wakefield said.

“Those batteries are such a massive component of the cost that it almost doesn’t really matter what you do on the other pieces,” he said.

Still, EVs might achieve price parity with internal combustion engine vehicles because of rising prices for gasoline-powered models. According to TrueCar, the average transaction price of a vehicle stood at $44,625 in October, a record for the month.

Higher transaction prices are being driven in part by automakers prioritizing more expensive, higher-margin vehicles over less expensive ones because of the microchip shortage. But price inflation is also being driven by spikes in labor costs, logistics challenges and higher energy costs, Robinet said.

“It’s not just one side of the equation,” Robinet said. “We’re seeing pretty extreme inflation in ICE vehicles, too.”

Regardless of how the markets for ICE and EV models evolve in the coming years, “it’s going to be a lumpy transition” for the industry, he said.

Luca Ciferri contributed to this report.

Products You May Like

Articles You May Like

1967 Mustang in a Swamp! – Roadworthy Rescues S1 Ep 1 FULL EPISODE | MotorTrend
Best Black Friday 2022 Green Deals: e-bikes, power stations, more
Hyundai is on a hot streak in the U.S., but Biden’s Inflation Reduction Act could spoil it
UK Driver Gets 15 Month Driving Ban After Caught On Video Drifting Around Roundabout
German auto industry could face tougher rules over China relations

Leave a Reply

Your email address will not be published. Required fields are marked *