Automotive Industry on Edge Amid Ukraine Conflict... 'Anxious and Uneasy'

Battery Prices, Accounting for 40% of Electric Vehicle Cost, Show Signs of Increase
Concerns Rise Over Potential Impact on Finished Vehicle and Auto Parts Exports

Gunfire and explosions continue across Ukraine due to the Russian invasion. The photo shows the area around Kyiv, the capital of Ukraine, burning from bombings on the 24th (local time). (Photo by the Office of the President of Ukraine)

[Asia Economy Reporter Sung Kiho] As the armed conflict between Russia and Ukraine intensifies, raw material prices are soaring. In particular, the rising prices of battery-related raw materials are deepening the concerns of automakers producing electric vehicles. The industry currently believes that there will be no major issues in battery supply due to stockpiles and long-term contracts. However, there are concerns that if the situation prolongs, the increase in raw material prices could negatively impact future contracts.

According to the Korea Resource Information Service on the 26th, lithium prices on the London Metal Exchange (LME) surged more than tenfold from 39 yuan per kilogram to 444.5 yuan on the 23rd. Nickel and aluminum prices also doubled. Cobalt, used as a raw material for ternary batteries, jumped from $33,500 to $73,005, and manganese rose from $1,205 to $1,715.

The battery and electric vehicle industries are deeply concerned about raw material prices. Essential raw materials such as aluminum and nickel, which have already risen significantly, may increase further due to the Russia-Ukraine conflict. Nickel, lithium, aluminum, and copper are key minerals for battery production. Nickel and lithium are used for cathode active materials, aluminum is used for cathode active materials or aluminum foil, and copper is used to make anode foil known as copper foil.

During the 2014 confrontation between Ukraine and Russia, prices of major minerals also surged. Russia accounts for 13% of global aluminum production and 10% of nickel production. Economic sanctions against Russia inevitably lead to higher prices. Additionally, Ukraine is a country rich in raw materials such as manganese, which accounts for 22% of the world's reserves, as well as nickel and cobalt.

As battery raw material prices continue to rise, the burden on the automotive industry is increasing. The rise in raw material prices leads to higher battery prices for electric vehicles, which directly results in increased electric vehicle prices. Batteries account for 40% of the cost of electric vehicles.

Overseas companies have already started raising prices. Tesla increased the price of the Model 3 Long Range by nearly 10 million won within a year. China's BYD also raised prices by over $1,000 for some models last month.

While electric vehicles face challenges, the complete vehicle and parts markets are also in a state of emergency. Passenger cars and automotive parts account for 25.5% and 15.1%, respectively, of South Korea's exports to Russia. During Russia's forced annexation of Ukraine's Crimean Peninsula in 2014, South Korea's passenger car exports to Russia plummeted by 62.1% the following year due to Western sanctions, and tire exports dropped by 55.7%.

Significant damage is expected to local vehicle production and parts exports. According to the Korea Automobile Manufacturers Association (KAMA), over 90% of parts exported by South Korean automotive parts companies to Russia are supplied to Hyundai and Kia's Russian factories. If exports are disrupted due to the sanctions, production at Hyundai and Kia will inevitably face difficulties.

Hyundai and Kia operate a production plant in Saint Petersburg with an annual capacity of 230,000 units. Due to the contraction of the Russian market caused by U.S. sanctions, damage to Korean companies operating locally is also a concern.

An industry official stated, "Prices of minerals used as battery raw materials have been rising since last year, and related companies have secured stockpiles through long-term contracts. However, if the Ukraine situation prolongs and raw material prices increase, it could negatively affect additional supply contracts."

This content was produced with the assistance of AI translation services.