EV Battery Manufacturing Affected by Russian Sanctions
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EV Battery Manufacturing Affected by Russian Sanctions

Photo by:   Unsplash, Joshua Hoehne
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Alfonso Núñez By Alfonso Núñez | Journalist & Industry Analyst - Wed, 04/06/2022 - 16:12

Sanctions on Russia increased as the conflict in Ukraine escalated, which could hurt electric vehicle (EV) manufacturing because Russia is a top supplier of class 1 refined nickel, a metal essential to battery production. The cost of class 1 nickel had already been increasing, worrying manufacturers as nickel access has been further limited during the past few months because Russia has about 17 percent of the global reserves of this metal.


The industry’s supply chain crisis has worsened as a result of the ongoing conflict in Eastern Europe, as Ukrainian neon gas is needed in the production of microchips, while the supply of Russian palladium has been cut off. Furthermore, the shutting down of Chinese automotive manufacturing plants due to the country’s latest COVID-19 surge presented yet another challenge for the industry’s recovery.


Since Russia’s invasion of Ukraine in late February, nickel prices have increased by 40 percent. This increase threatens electromobility transitions worldwide but particularly in Mexico where EV roll out has been limited, as these cars are considered “luxury” vehicles by a population largely unable to acquire these environmentally friendly but costly models.


José Zozaya Délano, President, Mexican Automotive Association Industry (AMIA), foresees the rising prices of nickel will lead to an increase in EV production costs but as of now, it is difficult to estimate what the impact will be on Mexico’s still developing EV market.


“Let us hope that it is something fleeting and that it does not really affect us. The value of nickel in international markets obviously marks the cost, which is passed on to the shipowner and of course the owner will pass it on to the sale of the vehicle,” said Zozaya Délano. He added that it is still undetermined whether the higher cost of nickel has been passed to the final consumer in Mexico or abroad.


Mexico’s EV sales in 2021 only represented 4.6 percent of all vehicle sales, following a 92.9 percent year-to-year increase that resulted in 47,079 units being sold, according to data from AMIA. Automotive consultant JD Power reported the average price of cars in the country increased by 55 percent over the last six years. Currently, the average price for a vehicle is about MX$399,000 (US$19,846) while EV and hybrid vehicle prices average MX$443,769 (US$22,072).


“It is going to affect us. Unfortunately, we are seeing that with any lack of product, even for logistical issues, prices skyrocketed, which is something we had not seen. Last year, [automotive inflation] more or less averaged 8 percent in Mexico, and now it increased to 14-15 percent last year to this one,” said Gerardo Gómez, General Director, JD Power Mexico.

Photo by:   Unsplash, Joshua Hoehne

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