The supply chain fallout from the war in Ukraine could make electric vehicles more expensive to build as raw material prices jump higher.
That could hamper consumer EV adoption just as automakers plan to roll out many new battery-powered models, warns a report out this month by S&P Global Mobility.
The new logistics problem could affect the batteries used in several popular EV models, potentially eating into their manufacturers' profits.
EV makers could find themselves at heightened risk because of the Ukraine war. Here's one reason.
Russia is a top supplier of nickel used in automotive batteries.
The economic fallout from the Ukraine invasion has caused volatility in nickel pricing, with prices surging to as much as $100,000 per ton on March 8, up from around $30,000 a day earlier.
Increased nickel prices could make EVs more expensive to build, forcing price increases or hits to companies' bottom lines.
Source: S&P Global Mobility
As a result of the Ukrainian situation, the Tesla Model Y crossover, the most popular EV on the U.S. market, could see input costs for battery raw materials surge by almost $8,000 per vehicle this year, S&P Global Mobility estimated.
Battery raw materials costs for the Mercedes-Benz EQS could skyrocket by about $11,000 compared with 2021 prices. Mercedes CEO Ola Källenius said last week that the company will hold firm on its EV investment plans despite higher costs.
S&P Global Mobility, formerly IHS Markit's automotive team, said Russia's invasion of Ukraine has exacerbated price pressures by inflating raw material prices. Nickel is of particular concern, since Russia is the world's third-largest supplier of the metal. Norilsk Nickel, the world's biggest producer of high-grade nickel used in EV batteries, is based in Russia.
German chemicals giant BASF, which manufactures nickel and cobalt for automotive batteries, said it will not sign new agreements with Norilsk because of the invasion. S&P said other manufacturers have suggested they will do the same.
While Norilsk has not been the target of economic sanctions imposed by the U.S. or other countries, uncertainty about where companies will source nickel has rattled the market, as has the lingering threat of further sanctions, among other factors.
Nickel, which has traded for between $10,000 and $20,000 per ton over the past decade, traded for more than $100,000 per ton on March 8, triggering a weeklong suspension of nickel trading on the London Metal Exchange. Prices have since dropped.
"It's clear that at current prices, we will see, at a minimum, any price reduction linked to batteries' economies of scale wiped out by increased input costs," the March 9 report reads.
"It is also clear that should these elevated price levels continue into 2023 and beyond, the likelihood of a delay of the tipping point for [internal combustion engine] versus BEV cost parity — a critical metric to measure battery-electric vehicle adoption — markedly increases."
According to S&P, nickel has become a popular metal for battery manufacturers to use as a substitute for cobalt. Cobalt has been linked to human rights abuses in Congo, which produces much of the world's supply of the metal.
Other problems continue to arise for the global auto industry as a result of the Russian invasion. Among last week's developments:
BMW also said it plans to resume full output this week at two factories in Germany and one in the U.K. that were down because of parts shortages stemming from the conflict.
Reuters and Bloomberg contributed to this report.
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