Tata Motors says 20% rise in battery cell costs increasing short-term pressure
NEW DELHI: Tata Motors, India’s top-selling electric carmaker, said the cost of battery cells had risen by around 20% due to a global spike in raw material prices, mainly lithium, putting pressure on the business in the short term.
Shailesh Chandra, managing director of passenger vehicle and electric mobility subsidiaries, told Reuters that cell prices have been rising over the months and he expects them to remain high for about a year.
“The immediate impact seems to be some sort of increase of around 20% which will have short term pressure. It should moderate within a year and then start to decrease,” he said.
Chandra didn’t say whether this would affect the company’s sales or profitability, but said demand for “green personal mobility” is growing sharply and he expects to offset some of the cost by increasing the use of locally sourced components in its cars.
Automakers around the world are facing inflationary pressures due to soaring costs of nickel, cobalt and lithium which are used to make batteries – the most expensive part of an electric vehicle (EV) – as demand exceeds supply.
This has been compounded by Russia’s invasion of Ukraine, and analysts say this threatens to slow the downward trend in battery prices, which could hamper wider adoption of electric vehicles, especially in price-sensitive markets like India.
In the nascent electric vehicle market in India, electric cars account for just 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 automakers have yet to launch electric models.
Spot prices for lithium carbonate, which is typically used to make lithium-ion batteries, jumped to more than $70,000 a ton in March 2022 from around $10,000 a year earlier, forecaster data shows. of the Benchmark Market Intelligence sector.
“Going forward, this inflationary impact is likely to continue,” said Manish Dua, principal analyst at Benchmark.
Tata recently hiked the price of its Nexon electric SUV in India by more than $300, a 2% increase for the base model, following similar moves globally by Tesla Inc. and China’s BYD .
Even so, Tata, which has more than 90% of India’s electric car market, expects sales of its electric cars to quadruple this financial year from 4,200 units last year.
The electric vehicle 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.
Chandra said that as battery recycling accelerates, there will be access to raw materials beyond the mines and that will offset some of the cost pressures.
“Short-term spikes will occur. It is good to focus on the long-term secular trend which will continue to decline,” he said.