Nickel Price Surge Could Increase Price of Electric Vehicles

The price of nickel has soared over the last couple of weeks following Russia’s invasion of Ukraine. Russia, one of the largest global suppliers of the metal, is facing extensive sanctions for its actions.

The London Metal Exchange (LME) suspended nickel trading on Tuesday morning after three-month contract prices shot up to over $100,000 per ton. Nickel is a core ingredient in the lithium-ion battery cells used in most EVs, and its sudden surge is bound to cause problems in production and ultimately increase the prices of the vehicles. Newer li-ion batteries, like the ones that Korean battery giant LG Chem supplies to Tesla, are 90% nickel, for instance.

CNBC mentions in its report that Morgan Stanley auto analyst Adam Jonas has been among the loudest voices raising concerns, saying, “As of this writing, nickel is up 67.2% just today, representing around a $1,000 increase in the input cost of an average EV in the U.S.” on Monday,

He also said that investors should reduce their expectations for automakers’ earnings and EV sales penetration over the next few years, as nickel’s abrupt price surge could undermine the ambitious EV plans put forth by global automakers, including General Motors and Ford Motor.

The effects of supply chain shortages are already evident in the U.S. EV market. Prices for the Tesla Model 3 have risen by 18% since December 2020, and earlier this month, Rivian announced that it would be hiking prices for the R1T electric pickup truck and R1S electric SUV by up to 25%. The potential unavailability of nickel will only see these numbers rise.

That said, Tesla may likely face less of a burden following its decision to power the Model 3 and Model Y cars with LFP (lithium iron phosphate) batteries that contain no nickel and no cobalt in their cathodes. However, its next-generation 4680 cylindrical cells will employ a nickel-rich cathode. Tesla has recently signed nickel supply deals and inked its first U.S. supply back in January.