Russia’s war could stall production and development of electric vehicles

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Due to the Ukraine-Russia crisis, Germany may not be able to meet its target of 15 million electric vehicles (EV) on the roads by 2030 as a result of soaring nickel prices, where Russia is the world’s third-largest producer of the vital material for EV batteries.

According to a report by GlobalData the crisis has led to the price of nickel increasing by 18% since the end of 2021 to over US$24,000 per metric tonne. As a result, Germany could witness muted growth for EVs in the coming years.

According to the German Environment Agency (Umweltbundesamt – UBA), the transportation sector accounts for 20% of total emissions in Germany. Two of the important drivers for EV adoption has been the central subsidy and the battery prices. With battery prices set to increase and uncertainty on the central subsidy level from 2023, Germany may not be able to meet its EV target.

Mohit Prasad, Practice Head of Power at GlobalData, comments: “Russia is the world’s third largest nickel producer. Nickel is a significant ingredient that is used in lithium-ion battery manufacturing. Batteries are the most important component of the electric vehicle. The Ukraine-Russia crisis has led to the highest increase of nickel prices in a decade.”

Automakers in Germany have already been affected by the crisis. Volkswagen, which had contributed more than 20% of country’s EV sales in 2021, has suspended production at two factories in eastern Germany because the crisis has interrupted deliveries of critical parts from western Ukraine. If this continues, other manufacturers could also potentially suspend their operations.

Prasad adds: “Germany has set an interim target of 48.1% reduction in greenhouse gas emissions coming from the transport sector from the 1990 level by 2030. The growth of the electric vehicle market is important for this. The country has already crossed one million electric cars on the roads. Half of these are Battery Electric Vehicles and the remaining are Plug-in Hybrid Electric Vehicles. To reach its 15 million target only for EVs by 2030, the market should grow at a CAGR of 35%.

“Considering the issues and delays related to procurement of raw materials, which would be further amplified with the Ukraine-Russia crisis, the country could expect a muted growth in the EV sector. This might dent the country’s preliminary target to reduce greenhouse gas emissions coming from the transport sector by 2030.”

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