Though we are repeatedly led to believe that economies of scale will continue to drive down prices of hybrids and electric vehicles (EVs), several reports indicate that the exact opposite may occur. Why do some people believe that economies of scale will drive prices up? The answer is a simple daily dose of economics – supply and demand. As demand for the rare earth metals found in batteries and electric motors rise, prices shoot up. Considering that many of the rare earth metals are said to be in limited supply, simple economics would suggest that prices will only continue to increase with demand.
Many other recent reports touch on rising prices created by high demand. First, there's the report from Metal-Pages which indicates that the price of neodymium, an element used in electric motors, has doubled in the past year. Then there's the words of Robert Bryce, author of Power Hungry, which indicate that "prices will gyrate upward, adding cost to any automaker building hybrids." Finally, Roskill Consulting states that demand for rare earth metals will outstrip supply within four years, leading to really high prices. Are we being led to believe that prices will drop, when in reality an increase in pricing may lie ahead? Maybe, maybe not. The future of the industry is riddled with uncertainties and this simply adds one more to the ever-growing list.
[Source: Automotive News – sub. req.]
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