Elon Musk's dream of cheaper electric cars dashed by Ukraine- Russia war: Report

Nickel prices have reached an 11-year high due to fears that Russian exports may be disrupted as a result of the conflict in Ukraine.

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Elon Musk and other auto executives' plans to introduce more affordable electric vehicles could be set back by rising raw material costs, caused by Russia's invasion of Ukraine.

According to Gregory Miller, an analyst at industry forecaster Benchmark Mineral Intelligence, rising prices for nickel, lithium, and other EV parts could slow and even reverse the long-term trend of falling costs for batteries, the most expensive part of the cars.

The supply chain is already snarled by the COVID-19 pandemic and the global chip shortage. "Rising raw material prices certainly have the potential to delay the timeline on cost parity between EV and ICE vehicles, which could hamper the wider adoption of EVs," Miller said, referring to internal-combustion engine vehicles that dominate the market.

The conflict in Ukraine has only raised the stakes, pushing nickel prices to an 11-year-high on fears that exports from leading producer Russia could be disrupted. Lithium prices also have increased, more than doubling since year end, as supply fell short of rising demand. Russia produces about 7% of the world`s mined nickel. It is also a large provider of aluminium and palladium.

Rising EV prices marked by hikes over the past year by Tesla and start-up Rivian Automotive - matter because mainstream consumers are not going to pay a massive premium for a technology that many do not yet fully embrace.

More than half of consumers are not prepared to pay $500 extra upfront to buy an EV, despite lower operating costs, according to a 2021 study by OC&C Global Speedometer on consumers in the United States, China and other countries.

Tesla raised the price for its least expensive Model 3 sedan by 18% to $44,990 since December 2020, as supply chain woes weigh. Musk also said in January that Tesla is not developing a $25,000 car he promised during 2020 battery day, saying there are too many things on his plate.

The average EV sold for almost $63,000 in January in the United States, about 35% higher than the overall industry average for all vehicles of just over $46,000, according to research firm Cox Automotive.

With inputs from Reuters