Lithium Prices Plummet: Will EVs Become More Affordable?

Lithium prices have seen a significant drop since the beginning of 2024, with analysts predicting they will remain below the record highs of 2022-23. This trend could have positive implications for the electric vehicle market, particularly for electric two-wheelers.

Battery-grade lithium carbonate is currently trading at 91,323 Chinese yuan ($12,574) per tonne, while lithium hydroxide is at 83,030 yuan ($11,432) per tonne. These prices represent a staggering 70% decrease from their peak in December 2022.

BMI, a unit of Fitch Solutions, forecasts average prices for lithium carbonate and hydroxide in 2024 and 2025 to be substantially lower than the previous two years. This downward trend is primarily attributed to a rapidly expanding global lithium supply that has pushed the market into surplus.

Several factors are contributing to this price decline like its weak demand, especially in the EV sector, followed by the subdued economic activity in China, and the continuous ramp-up of lithium production worldwide.

While the immediate future may see some price stabilization as high-cost producers exit the market, long-term projections remain uncertain. Factors such as the pace of EV adoption, advancements in battery technology, and government policies could influence future prices. The Australian Office of the Chief Economist suggests that from 2026, alternate battery chemistries could put additional pressure on lithium-ion EV batteries, potentially leading to further price reductions.

How Does The Above Help The Aam Junta?

For consumers, particularly those interested in electric two-wheelers, this price decline could likely translate into more affordable vehicles. As battery costs typically constitute a significant portion of an electric vehicle's price, reduced lithium costs may lead to lower production expenses for manufacturers. However, whether the manufacturer decides to lower the asking price or keep the current asking price the same for a longer period remains to be seen. The latter is the more likely option as it should help the manufacturer reduce its losses, even by a small amount, and also keep the customer happy with no frequent price revisions.