Tata Motors said the cost of battery cells had increase by around 20% because of a global surge in raw material prices, mainly lithium, putting pressure on the company in the short-term. Shailesh Chandra, managing director of the passenger vehicles and electric mobility subsidiaries, said that cell prices have rising over months and he expects them to remain high for about a year.
Shailesh Chandra Said :
“Immediate impact seems to be about a 20 percent kind of an increase which will have short-term pressure. This should moderate within a year and then start coming down,”.
Shailesh Chandra did not comment on whether this would affect the company’s sales or profitability but said that demand for “green personal mobility” was rising sharply and he expect to offset some of the costs by increasing the use of locally source components in its cars.
Automakers globally are facing inflationary pressures due to surging costs of nickel, cobalt and lithium that are use in making batteries, the most expensive part of an electric vehicle (EV), as demand outstrips supply.
This problem made worse by Russia’s invasion of Ukraine, and analysts say it threatens to slow the trend of falling battery prices which could hamper the broader adoption of EVs, especially in price-sensitive markets like India.
In India’s EV market, electric cars make up only 1% of total car sales.
High battery prices and an insufficient charging network are the main reasons why there are few takers, and why more carmakers are yet to launch electric models.
Spot prices for lithium carbonate, which is typically use to make lithium-ion batteries, surge to over $70,000 (approx. Rs. 53.2 lakh) per tonne in March 2022 from about $10,000 (approx. Rs. 7.6 lakh) a year earlier, as per the data from industry forecaster Benchmark Market Intelligence.
Manish Dua, senior analyst at Benchmark Said :
“Going forward this inflationary impact is expected to continue,”.
Tata recently increase the price of its Tata Nexon electric SUV in India by over $300 (approx. Rs. 22,800) as a 2% rise for the base model, following similar moves globally by Tesla Inc and China’s BYD.
Tata has over 90% share of India’s electric car market, expects sales of its electric cars to grow over four-fold this fiscal year from 4,200 units last year.
The EV maker sources lithium-ion batteries for its cars from Tata AutoComp Systems, which has a joint venture with China’s Guoxuan Hi-Tech to produce them locally.
Shailesh Chandra Said :
“Short term spikes will happen. It is good to focus on the secular long term trend which will keep going down,”.
As Shailesh Chandra said as battery recycling gains pace there will be access to raw materials beyond mines and that will offset some of the cost pressures.
