As the price of natural gas in the U.S. has hit record highs in the wake of Russia's invasion of Ukraine, it looks like electric cars may no longer be a safe haven for those looking to save money. That's because Russia plays a major role in producing the nickel that goes into the batteries used by many electric vehicles, a metal that's rising in price even faster than oil.
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On February 25, nickel was trading on the London Metal Exchange at about $24,000 per ton, according to the Wall Street Journal. By March 8, it was trading at $80,000 and the London Metal Exchange had suspended trading. There are several reasons for the massive price surge, such as economic upheavals, but it is also impossible for the market to ignore the fact that a major nickel producer is at war and facing a series of international sanctions.
When it comes to nickel mining, Russia isn’t a huge player. According to the WSJ, the country supplies up to 6% of the world’s nickel. But Russia’s role in producing the nickel used in electric vehicle batteries is a different story. The CEO of Benchmark Mineral Intelligence says that 20% of that supply comes from just one Russian company.
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Automakers, of course, are aware of nickel’s scarcity. Elon Musk, CEO of Tesla, said on Twitter in late February that his EV company plans to shift its cars away from nickel-hungry lithium-ion batteries. He said Tesla will move toward iron cathode technology, but it’s hard to say how long that process will take. It also doesn’t help with the most desirable long-range models. According to Bloomberg and Reuters, nickel prices had already become a problem for electric vehicle makers even before the invasion.
It is not impossible to manufacture batteries without nickel. Volkswagen and other automobile manufacturers are examining other battery technologies that do not use it or cobalt, according to Reuters.
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However, just as energy policy, production and integration of batteries is a major issue for automakers, and if the prices of nickel and other metals remain high, they will need to find alternatives much more quickly. If automakers do not make the shift quickly, it could make EVs even more unaffordable for most Americans, at a time when natural gas prices make them look better than ever.
