Drastic lithium price nosedive may bring EV profit margin respite rather than cheaper electric cars

Since prices of refined EV battery-grade lithium reached their peak back in November, they have fallen 47% with just this past Friday to Monday drop shaving off nearly 4%. That's the largest lithium price percentage decrease for the year, but, according to NIO, the 2023 nosedive won't stop until lithium carbonate hits a third of its peak US$85,760 fall pricing per ton.

Needless to say, the performance EV maker is rather pleased with the tendency. During its last investors call, NIO mentioned that the peak-to-trough decrease of the price of lithium will improve its gross margins by the whopping 8% as the battery pack can be responsible for half of the EV production costs.

The 150 kWh semi-solid state battery that NIO developed for its vehicles is so expensive, for example, that it costs almost as much as the ET5 sedan itself. Before the drastic price drop of lithium NIO only intended to offer the high-nickel 150 kWh pack only as a rental swap for longer trips like a summer vacation, instead of selling vehicles equipped with it outright.

The bad news for other EV makers, however, is that lithium prices are falling for Tesla as well. Not long ago, Elon Musk was waxing poetic how having a lithium refinery would be a "license to print money" with the prices of lithium carbonate at an all-time high then. Tesla even applied for a Gulf Coast refinery license of its own, intending to go ahead with it depending on the amount of state or federal incentives it receives.

Now that lithium prices are in a downward spiral, it may reconsider the plan for its own refinery. Tesla, however, has the lowest production costs of them all, so its record profit margins may benefit the most  from the current price fall of lithium amidst an EV price war of its own making.

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