The conflict between Russia and Ukraine has sent staples including oil, gas and wheat soaring. Meanwhile, the auto industry faces a dizzying rise in nickel prices.
Alexa St. Insider’s John and Nora Naughton say this is causing headaches for both traditional auto companies in transition as well as electric-car startups like Lucid and Rivian.
Even Tesla, the leader of the electric vehicle industry, is not immune to the impact. In the past week, the company has raised electric vehicle prices twice as a corrective move to the challenge of rising raw material prices as well as supply chain disruptions. The company’s cheapest car is now $45,000 more than it was about $38,000 before.
But unlike most of its competitors, Tesla is well-prepared for the changing nickel market thanks to a multi-year investment in its supply chain and a battery recycling strategy.
Why is the price of nickel skyrocketing?
Nickel is a key ingredient for the production of stainless steel and lithium-ion batteries. The depletion of nickel supplies has been warned for years, but a recent report by Norway-based energy analysis firm Rystad Energy suggests the industry has until 2024 before demand becomes available. oversupply and in 2026 before the crisis.
Nickel prices are having unusual movements in March.
Then, Russia suddenly invaded Ukraine. Russia controls 20% of the world’s supply of high-quality nickel and 10% of the world’s total nickel supply. So, when the United States and Western countries imposed economic sanctions on Russia, the nickel market immediately boiled. The London Metal Exchange canceled nickel trading for more than a week due to high prices. Trading was reopened in a limited way last week.
The high nickel price is partly due to limited mining. The nickel mining process is cleaner than another common ingredient in electric vehicle batteries, cobalt, but it’s still not environmentally friendly. In the US, the Biden administration recently sealed off a copper and nickel mine in Minnesota to protect its water and forests from contamination.
The noble purpose of electric cars is to limit carbon emissions, creating a cleaner environment. However, right from the exploitation of raw materials has caused a significant impact on the environment. That is a big challenge for this industry.
Tesla’s “Pain reliever”
Tesla’s strategy to avoid dependence on nickel market volatility has been in the works for years. The company has developed an independent nickel supply through partnerships with nickel miners and producers. They even purchased a nickel mine in early 2021, allowing direct access to the precious metal.
Tesla also spent several years developing the 4680 battery. This battery is still made from nickel but is said to be cheaper and has a longer lifespan than commonly used batteries today. When Tesla’s internal studies were complete, they immediately contacted their close partner, Panasonic, to bring them to mass production. Panasonic recently announced an investment of 700 million USD and started producing batteries in March 2024.
Elon Musk also said that Tesla will return to using lithium iron phosphate (LFP) batteries for low-end vehicles in 2020, and use manganese in some batteries to reduce nickel usage. Musk said the steps allow for cleaner, cheaper production of cars and increased output.
Finally, the company launched a nickel-based battery recycling program, benefiting both the supply chain and the environment. However, Marius Foss, Rystad Energy’s senior vice president of global energy systems, says that it will take decades for these recycling programs to produce significant efficiencies. “Once EV batteries are discharged, they will be used to store electricity before being recycled. 10 years ago, less than 1% of all cars sold were electric. By 2021, the Electric cars account for more than 10%,” Foss said.
Position and preparation give Tesla an advantage
No electric vehicle company is immune to nickel price increases. Tesla’s long-term goal of creating a $25,000 electric car will be more difficult due to the Russia-Ukraine conflict.
Still, some experts say Tesla’s forward-looking strategy puts it in a good position to continue to lead the electric vehicle industry. Foss said that more than half of Tesla vehicles delivered in the fourth quarter of 2021 used LFP batteries – something unmatched by any other Western car company.
He added that Tesla’s overall business infrastructure gives them the ability to pivot and accelerate faster than “traditional automakers with clunky dealerships and joint ventures.”
Tien Wong, a technology investor and founder of Connectprisur, said: “Before the conflict broke out, nickel prices and potential shortages were a major concern for Elon Musk and the EV industry as a whole. The outbreak of conflict exacerbates these dynamics, leading to higher prices and slower deliveries for electric vehicles.For Tesla, they are the market leader, so the situation may even help them. widen the gap with competitors in the short term”.
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