Why do the prices of lithium battery rise?

In the past month or two, a number of electric vehicle (EV) companies have announced a round of price increases, ranging from 1000 to 10,000 yuan. The direct reason is that the price of lithium batteries has increased. Some media reported that starting from 2022, the price of lithium carbonate (Li2CO3) increases rapidly which rose up to 500,000 yuan/ton in early March, an increase of nearly 70% compared with the beginning of the year. In this case, what are the exact reasons for the rise in lithium battery prices?

Reasons for the rise in lithium battery prices

The cost of raw materials for lithium batteries has risen 

At present, the four parts of the diaphragm, electrolyte, positive electrode material, and negative electrode material together account for 85% of the cost of lithium battery, about 25%, 15%, 30%, and 15% respectively. The high price of lithium batteries is largely due to the fact that the industry has not yet formed industrialization, mass production, insufficient production lines, low technological content of equipment, and repeated construction of low-end products, which restrict its development. 

The imbalance between supply and demand

Electric vehicles have exploded, and lithium batteries are in short supply. Driven by the explosive rise of downstream electric vehicles, the supply of Li2CO3 products of major companies is tight. The continuous development of the new energy vehicle industry has increased the market demand. Under such huge market demand, it is inevitable that the price of lithium batteries will remain high.

The popularity of new EV drives the demand for lithium batteries to increase

With the development of the EV industry, there is huge room for improvement in the market demand for lithium batteries. According to statistics, every 100,000 new energy vehicles will drive 5,000 to 8,000 tons of battery-grade lithium carbonate demand, which is equivalent to an increase of 5% to 8% in global Li2CO3 demand. The continuous promotion and popularization of new energy vehicles has stimulated the strong demand for lithium batteries and further opened up the space for lithium battery prices. 

The core technology of lithium batteries is lacking, and there are reasons for the increase

Diaphragm, electrolyte, positive electrode material, and negative electrode material are important components of lithium-ion batteries. Taking electrolytes as an example, my country relies heavily on imports. Due to the high technical difficulty of production, it is mainly monopolized by several Japanese companies such as Kanto Electrochemical Industry and Morita Chemical in the world.

In addition, there are currently hundreds of lithium battery manufacturers, but not many really have the production capacity of a complete set of power lithium batteries. Meanwhile, the production and recycling technologies of giant lithium battery manufacturers are relatively immature, and many-core technologies rely on purchasing foreign patents and advanced production equipment, resulting in higher production costs for lithium batteries.