Electric car prices could go up even as fuel prices soar

Photo by Andrew Hawkins / The Verge

As US gas prices hit record highs in the wake of Russia's invasion of Ukraine, it seems like electric vehicles may not be a safe place to save money. Russia plays an important part in the production of nickel that ends up in batteries used by many electric vehicles, and that metal has rocketed up in price even faster than oil.

According to The Wall Street Journal, nickel was traded on the London Metal Exchange for over $20,000 a ton on February 25th. The London Metal Exchange suspended trading on March 8th after it was trading at $80,000, down from a peak of over $100,000. There are a few reasons for the massive increase in price, but it's also impossible for the market to ignore the fact that an important nickel producer is at war.

The move in nickel prices today is by far the biggest-ever one-day increase in the six base metals (nickel, tin, copper, aluminum, zinc, lead) traded on the London Metal Exchange pic.twitter.com/m9ZqdTcBM6

— Nat Bullard (@NatBullard) March 7, 2022

Russia isn't a big player when it comes to mining nickel. The country supplies up to 6 percent of the world's nickel. It is a distant third behind Indonesia and the Philippines according to the US Geological Survey. The CEO of Benchmark Mineral Intelligence says that 20% of the battery-grade nickel used in EV's comes from a single Russian company.

Norilsk overall accounts for 7% of all in nickel supply. But EV makers, auto OEMs and battery cell producers will terrified of losing 20% of a market with prices already at decade long highs.

— Simon Moores (@sdmoores) February 24, 2022

They are aware of nickel's scarcity. In late February, Musk said that the company would shift its standard distance cars away from nickel-hungry battery cells. He said that the biggest concern for scaling was nickel, but it was not clear how long that process would take. It doesn't help with the more desirable models. Even before the invasion, nickel prices were a problem for EV manufacturers.

Musk said last week that the world needed to produce more oil and gas to make up for what it had been getting from Russia.

Volkswagen and other manufacturers are looking into other battery technologies that don't use nickel, and the price of which has also been on the rise.

If the prices of nickel and other metals stay up, it will be a race to switch to other tech before the shockwaves of higher prices and sanctions. At a time when gas prices are making them look better than ever, it could put EV even further out of reach for most Americans if automakers don't make the shift quickly.