Why war can slow down the boom in electric cars

For a few years now, the world car industry has not found peace. First it had to deal with the pandemic, then with the microchip crisis, now with the war between Russia and Ukraine, which is causing commodity prices to skyrocket. At this rate, efforts to increase EV production may not be enough to achieve the goals. Suffice it to say that Italy, with the Integrated National Energy and Climate Plan (Pniec), has committed itself to reaching the quota of six million electric vehicles in circulation by 2030. The European Commission has in the document Fits 55proposes to eliminate emissions from new cars by 2035. Goals that are difficult to achieve if braking and production blockages were to continue.

The case of nickel

The geopolitical scenario certainly does not help on the raw materials front. Last in line was the case with nickel, a basic component in electric car batteries. Last Tuesday, the London Metal Exchange in London actually blocked trading in nickel after the value reached $ 100,000 per barrel. ton. Energy costs and thus production costs have also increased significantly. All indirect consequences of the war between Russia and Ukraine. In fact, Russia is a major exporter of gas and oil, but it is also the third largest producer of nickel in the world, after Indonesia and the Philippines.

The Kremlin, which has been hit by Western sanctions, has announced that it is working on counter-sanctions against the so-called “hostile countries”. Measures that should also relate to the raw materials that the West continues to import from Russia.

Also rising in price are metals such as lithium (+ 441% year-on-year for the lithium price index according to Benchmark Minerals), cobalt (+ 54.75% in the last year) and copper (+ 10.4% year-on-year) . Basics in the production of batteries. And not just in electric cars.

The decline in production

The difficulty of finding semiconductors had already slowed down production in the car market. In recent months, large companies such as Stellantis, Volkswagen and Toyota have cut back on production or even closed factories due to a lack of microchips.

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All these difficulties, which are also reflected in the registration numbers. Taking Italy as a metro, according to data from the Ministry of Transport, 107,814 cars were registered in January: -19.66% compared to the same period the year before. In February – 110,869 registrations in total – had fallen by as much as 22.56%. The lack of components has led to several months of waiting for a new car. And the energy crisis also threatens to increase production costs significantly.

Rising prices

The situation has already partially reflected the prices of new cars, which according to data from the Autopromotec Observatory rose by 2.6% in 2021. The US company Rivian, which is considered anti-Tesla, has collapsed in the stock market in recent weeks after announcing the decision to raise the prices of its electric cars by 20%. This creates various disagreements among its customers as the increase was applied to all existing pre-orders. In a letter to shareholders, RJ Scaringe, the company’s founder and CEO, said the price increase was driven by rising costs for the materials needed to make the vehicles, including semiconductors.

Even Tesla, reports Reuters, has recently and for the same reasons again adjusted US prices on its Model Y and Model 3 by a thousand dollars each. He did the same in China, where the two models cost 10,000 yuan (about $ 1,500) more.

The importance of geopolitics

The case of electric cars is perhaps among the most emblematic, but it is the whole process of energy conversion that risks slowing down. A 2017 World Bank report showed that the transition to green technologies, in order to limit the rise in global temperatures to two degrees by 2050, requires the extraction of more than 600 million tonnes of rare metals. Among these is palladium, of which Russia is the leading exporter in the world, with a share of 45% of global production.

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Putin also has excellent relations with China, which, as reported by the Institute for International Political Studies (ISPI), extracted at least 62.8% of all rare earths before the pandemic. The West’s relations with both countries have deteriorated in recent years, up to the outbreak of the Trump-era trade war between the United States and China – not yet over – and the current tensions due to the war between Russia and Ukraine. It goes without saying that a successful energy transition will necessarily have to undergo a normalization of relations with Moscow and Beijing.

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