The Bubble has Burst!

Following a frenzied rush by electric vehicle makers to secure raw materials over the past two years, driving prices for lithium carbonate up more than six-fold, the bubble has finally burst.

Rare discounts offered by Chinese battery giant CATL to automakers have accelerated a plunge in lithium prices and the market is set to drop a further 25% with supply growth outpacing demand. The plunge in lithium prices came late last year as electric vehicle demand in China slowed sharply ahead of Beijing's planned halt to subsidies for the $87 billion industry, the world's biggest and fastest growing.

MORE SUPPLY TO COME

The lithium price slide steepened, as investors became wary of a drop in China's electric vehicles sales in January and also by CATL's discount terms, which included an assumption that prices of lithium carbonate, a key component in auto batteries, would more than halve. But even as demand worries have rocked markets, it is also the looming supply from China, Australia and Chile that will bring lithium prices down subsequently in the medium term.

WHAT DOES THIS MEAN FOR ELECTRIC VEHICLE PRICES?

This may be a great development for the electric vehicle industry and the environment as a whole. The cost of producing batteries for Electric Vehicles has hit a new low, with projections suggesting that it could more than halve in the next decade due to the increased supply of key materials.

This will make Electric Vehicles more affordable for consumers, thereby increasing adoption and reducing air pollution.

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