The recent drop in the price of lithium, a key component in electric car batteries, has confounded many analysts who had predicted that prices would increase–leading to more affordable electric vehicles.
According to data from Trading Economics, the price of lithium has plummeted 53% from its high in November 2022. Opinions on what caused this recent price drop vary. Some say the falling price of lithium was caused by slowing sales growth in China after subsidies for electric car purchases expired. Manufacturers who received cash rewards began overproducing batteries and selling their high inventory levels at a discounted rate.
Others say it has to do with China's near monopoly on lithium mining, as most lithium refineries are in China. Few managers and engineers outside the country know how to build processing plants. In response to concerns about this control over the lithium industry, the Biden administration allocated billions of dollars to lithium mine and refinery development in the United States or countries with close political and economic ties.
Luckily for consumers, this development has helped to make electric vehicles more affordable, even as sales have soared. According to Kelley Blue Book, the average price of electric vehicles in the United States dropped by $1,000 in February from January. And the price of cobalt, another important battery material, has also fallen by more than half. Meanwhile, copper, which is essential to electric motors and batteries, has slipped by roughly 18 percent.
This overall drop in commodity prices has made it easier for automakers to decrease prices for electric cars. Tesla, for example, recently lowered the prices of its most expensive cars, while Ford Motor also slashed the price of its Mustang Mach-E fully electric sports utility vehicle (SUV).