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The cost of materials for electric cars is putting a profit squeeze on automakers according to a report by AlixPartners. This is a long-term issue going back a decade, not a one-year or two-year issue.
People are annoyed that the electric cars they want to buy are sold out for a year or more and increasing in price almost daily. It must be Joe Biden’s fault, even though he wasn’t in office during the Covid-19 pandemic. He didn’t tell people to drink bleach instead of getting proper medical attention, but he is the president now, so it must be his fault.
Reactionaries like to create economic pain and let others clean up their mess. It happened during the Reagan years, the reign of Bush The Younger and Bush The Elder, and especially while Despicable Donald was in office. Everybody is mad at Joe Biden because the price of gasoline is so high it can cost $100 or more to fill the tanks of all those Suburbans, Expeditions, F-150s, Sierras, Silverados, and Rams that people insist they need. For many, they are what one CleanTechnica reader refers to as “driveway candy.”
In its annual AlixPartners Global Automotive Outlook, the research firm finds that car companies have made it through the pandemic in relatively good shape but that the cost of raw materials needed to build electric cars more than doubled during the coronavirus pandemic. The study finds that raw material costs for an EV totaled $8,255 per vehicle as of May, 2022. That’s up 144% from $3,381 per vehicle in March 2020. The increase has been led by materials such as cobalt, nickel, and lithium — minerals essential for the production of many of the batteries used to power electric cars and trucks.
The cost increases aren’t limited to electric cars. Raw material costs for traditional vehicles with internal combustion engines have also more than doubled during that time period, to $3,662 per vehicle, up 106% from an average of $1,779 per vehicle in March 2020. That uptick is being led by increases in steel and aluminum.
Nevertheless, automakers are continuing to introduce new electric cars. AlixPartners predicts the number of EV models available on the global market will increase from 80 last year to more than 200 by 2024. As a result, AlixPartners expects the higher costs to force a relative slowdown in EV launches, as automakers move away from pushing electric vehicles to market as quickly as possible and refocus on profitability.
Ford Motor CFO John Lawler last week said rising commodity costs have wiped out the profit it initially expected to make on its electric Mustang Mach-E, according to a report by CNBC. While the vehicle was profitable when it was first launched in late 2020, he said that’s no longer the case.
In the meantime automakers are raising prices for buyers. GM on Friday announced it would hike the price of its electric Hummer by $6,250. The automaker blamed higher prices for parts, technology, and logistics. Tesla, Rivian, Lucid, and others previously announced notable increases in the starting costs of their EVs.
The AlixPartners analysis finds that the variable cost globally of building an EV remains $8,000 to $11,000 more than the cost of building a traditional internal combustion vehicle. The study says that economies of scale will not be able to approach that of traditional vehicles until the end of the decade. That’s despite the fact that the cost per kilowatt-hour of a battery pack is expected to reach the $100 mark by 2025, the analysts claim.
The analysis finds the industry at large is highly susceptible not just to chip shortages but to future disruptions for many materials — from steel to packaging — due to short-term industry ordering habits and low visibility into supply chains, plus design and engineering approaches that don’t allow flexibility.
In other words, the supply lines were created with little thought as to how wars and global pandemics might impact the system. AlixPartners says the automakers have a long road ahead of them to get their houses in order and untangle the complex supply lines they created when everyone assumed globalization was the answer to everything.
It’s such a pity Joe Biden loused everything up even before he took office. Things were going so well until he got his hands on the levers of power. Now we all have to suffer because those godless socialists are in control. It’s so unfair!
Steve writes about the interface between technology and sustainability from his homes in Florida and Connecticut or anywhere else the Singularity may lead him. You can follow him on Twitter but not on any social media platforms run by evil overlords like Facebook.
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