Material costs for EVs is up 75 percent from 2020, 3x higher than ICE vehicles

High inflation, soaring energy cost, as well as shortage of aluminum and semiconductor parts have been driving car prices upwards since the pandemic-hit 2020. According to a latest study by financial advisory and consulting firm AlixPartners, increase in material cost for battery electric vehicles (EVs) models have outpaced internal combustion engine (ICE) models.

The firm estimates that as of September 2022, the average material cost for an EV is now USD 5,076. The figure is nearly 75 percent higher than the same period in 2020.

Material cost for combustion engine models (including hybrids) have also seen a steep increase, but not as much as EVs, rising 25 percent from USD 1,475 in 2020 to USD 1,851.

Material costs for plug-in hybrids have not been calculated but are most likely higher than those of BEVs, said Dario Duse, head of AlixPartners in Italy, at a recent event in Milan to present the AlixPartners study, according to a report by Automotive News Europe.

The costs are for production in Europe and include all key raw materials; costs include both those born by automakers and part suppliers.

The cost does not include manufacturing cost, which AlixPartners estimates to be at around USD 3,100 per EV.

The reason behind the steep increase is the cost of raw materials to make batteries – lithium, cobalt, manganese, and nickel. Demand is not the only reason driving prices of raw materials up, as energy prices also have a direct impact on mining and processing cost.

This also means that earlier projections of EVs reaching price parity with combustion engine models are no longer valid.

Also read: Renault: Prediction of cheaper EV batteries were wrong, calls high-end models environmental nonsense

The good news is that the industry has passed the peak in cost, which was at USD 6,848 per EV in March 2022. The impact of high energy cost on EV manufacturing will be reduced over time as EVs are usually made with more energy efficient processes.

Source: Material costs for EVs is up 75 percent from 2020, 3x higher than ICE vehicles