EV makers should reconsider raw material supply chains – RBC

An electric vehicle charges in Manhattan, New York
FILE PHOTO: An electric vehicle is charged in Manhattan, New York, on December 7, 2021. REUTERS/Andrew Kelly

March 14, 2022

(Reuters) – Electric car makers may need to reconsider how they source raw materials as the surge in commodity prices amid Russia’s invasion of Ukraine puts pressure on their profit margins, analysts at RBC wrote in a note on Monday.

Prices for everything from oil to metals like nickel and palladium, used in the manufacture of electric vehicles, have skyrocketed as Ukraine’s crisis escalated.

“Just turning on the lights in the factory and moving goods now costs more and squeezes margins,” RBC analyst Joseph Spak wrote in the statement.

A sustained increase in commodity prices, rather than a short-term shock, may pose a problem for automakers, with many having limited ability to implement further price hikes, the release said.

“In any case, the lesson for cars is to rethink value chains, especially as the industry transitions to battery electric vehicles,” Spak wrote, noting that the recent spike in nickel prices has resulted in a $1,000-$2,000 increase in costs battery pack for an electric car manufacturer.

A variety of input prices, including lithium, nickel, cobalt and copper, could move “largely” over the next few years due to demand-supply mismatches, he added.

Even electric vehicle leader Tesla sees “significant” inflation for commodities and logistics, its chief executive Elon Musk said Sunday.

(Reporting by Aniruddha Ghosh in Bengaluru; Editing by Krishna Chandra Eluri) EV makers should reconsider raw material supply chains – RBC

Emma Bowman

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