Competition, Abundant Minerals, Biden Tax Breaks Lead EV Price Drop

May 21, 2023

Markets work. I don’t say the the whole world should be configured by markets and only markets, Policy helps, tax breaks help. But if you ignore the market, you won’t understand what is driving this energy transition.
Brief excerpt here, but go read the article in the NYTimes.

The Wall Street Journal video above was produced just a bit before the commodity price easing that we have seen in recent months, but captures the competition for customers that is heating up, and uses the phrase “pricing war”.

New York Times:

More quickly than seemed possible a few months ago, sticker prices for electric vehicles are falling closer to the point where they could soon be on a par with gasoline cars.

Increased competition, government incentives and falling prices for lithium and other battery materials are making electric vehicles noticeably more affordable. The tipping point when electric vehicles become as cheap as or cheaper than cars with internal combustion engines could arrive this year for some mass market models and is already the case for some luxury vehicles.

Prices are likely to continue trending lower as Tesla, General Motors, Ford Motor and their battery suppliers ramp up new factories, reaping the cost savings that come from mass production. New electric vehicles from companies like Volkswagen, Nissan and Hyundai will add to competitive pressure.

The battery-powered version of G.M.’s Equinox crossover, for example, will start around $30,000 when it arrives this fall, the carmaker has said. That is $3,400 more than the least expensive gasoline-fueled Equinox. But factoring in government incentives, the electric Equinox should be cheaper. Like all electric vehicles, the car will need less maintenance, and the electricity to power it will cost less than the gasoline used by its combustion engine equivalent.

Falling prices for materials like lithium and cobalt have also helped. The price of lithium used in batteries has fallen 20 percent from its peak in November, though the metal still costs more than twice as much as it did at the end of 2021. Cobalt has fallen by more than half since May, in part because carmakers are selling some models that do not require it, reducing demand.

New lithium mines are beginning to produce ore, which could keep a lid on prices. Sigma Lithium will begin shipping lithium concentrate from a site in Brazil to LG Energy Solution, its main customer, as early as April, Ana Cabral Gardner, Sigma Lithium’s chief executive, said in an interview. The site will be the first new source of lithium in Latin America for several years.

In a moment that went almost unnoticed by the audience, however, Musk mentioned a change that could impact Tesla’s demand for copper.

He confirmed the automaker is switching its models’ low-voltage system from 12 volts to 48 volts.

Tesla says that starting with the Cybertruck (slated to be released this year), the Optimus robot, and all future electric vehicles, the 48V low-voltage system will be used.

“Cars have been operating with 12V batteries for basically about a century, so for the first time in I think over a hundred years we’re actually going to change from 12V outside of the drivetrain to a 48V architecture,” said Musk.

The automotive industry moved from 6V to 12V in the 1960s. Some smaller vehicles still use 6V, while larger vehicles use 24V.

In traditional 12V systems, wiring and components must be larger and heavier to handle high electrical loads. With a 48V system, Tesla expects a reduction in battery weight and cost savings. As a result, it could also result in less copper used in manufacturing.

“First approximation, that means we need only about a quarter as much copper in the car as would be needed for a 12V battery, so that’s a big deal because people often worry about whether there is enough copper,” Musk said. “Yes, there is.” 

Some Tesla cars use up to 82kg of copper. For example, Tesla’s Model S uses a mile of copper just in connecting the battery packs to all electronics. 

As reported by MINING.COM, to achieve Tesla’s goal of building 20 million cars per year, the company would need 1,820,000 tonnes of copper, roughly 9% of global production in 2022 or almost two years of production at Escondida in Chile, the world’s largest copper mine.

Based on Musk’s prediction of a reduction to a quarter of today’s copper usage, at annual production of 20 million electric vehicles, the company could save more than 1.3 million tonnes, which equals over $10 billion at today’s prices.


One Response to “Competition, Abundant Minerals, Biden Tax Breaks Lead EV Price Drop”

  1. The same logic applies to the economy as a whole. As long as fossil fuels are provided with the massive subsidy of free pollution, people and businesses will use them. Mandates and subsidies can reduce GHGs, but they only apply to the things they apply to. And their costs aren’t always fair to the public or to taxpayers. Cross-subsidies abound.

    A socially just carbon tax reaches all of the economy in an equitable way. To be socially just, the tax must be paid by the fossil fuel companies on the carbon content of their products at the point they enter the economy.

    The consumer side of the equation is even more important. To realign the entire economy to favor GHG reductions, the government can’t keep the tax revenue. Rather, it must distribute it directly to the citizens whose climate is being damaged. This aligns everybody’s incentives, and creates no cross-subsidies. Cheaper products and services are the low carbon ones. So consumers keep more of the tax revenue if they buy the cheaper, low-carbon products.

    The carbon cash-back also makes the system politically durable. Fossil fuel companies can plan for an orderly transition to other profitable activities that utilize their great wealth, land holdings, and expertise. The car companies are transitioning from gasoline to electric. The oil companies can do something similar.

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