Raw Materials Shaking Electric Vehicle Prices... "Battery Costs Increase by Up to 4 Million Won"

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Tesla Korea raised the price of the Model Y Long Range to 89.49 million KRW earlier this month. This vehicle, which was priced at 79.89 million KRW at the beginning of the year, has already seen three price increases this year alone. The Model 3 Long Range, which was 59.9 million KRW last year, has also risen by 18.8 million KRW to 78.79 million KRW currently. Due to the surge in raw material prices, vehicle prices continue to rise in Korea, the United States, China, and other markets.

Electric vehicle prices are fluctuating. There is growing consensus on the outlook that the price surge starting from raw materials will continue to impact electric vehicle product prices. It is also forecasted that electric vehicle prices could increase by up to 4 million KRW within the next four years.

According to the industry on the 27th, E Source, a utility-focused research company, projected that due to shortages of key raw materials such as lithium and nickel needed to manufacture batteries for electric vehicles, production costs for electric vehicles will rise by 22% over the next four years.

As battery production has increased globally, the price of electric vehicle battery cells has declined in recent years. The current average battery cell price is estimated at $128 per kWh, and it is expected to drop to about $110 per kWh next year.

However, due to rising raw material prices, battery cell prices are also expected to increase, peaking at $138 per kWh in 2026, before steadily declining until 2031.

Sam Jaffe, Vice President of Battery Solutions at E Source, stated, "The reason battery prices are soaring is due to increased demand for key raw materials like lithium, which are needed to produce tens of millions of battery cells. Lithium will become even scarcer in the future. Without mining lithium, batteries cannot be made."

Due to rising battery costs, it is anticipated that electric vehicle prices will increase by $1,500 to $3,000 per vehicle in 2026. Consequently, the electric vehicle sales forecast for 2026 has been lowered from 10% to 5% growth.