“Demand destruction” is a term being bandied about a lot these days. Investopedia defines it: “In economics, demand destruction refers to a permanent or sustained decline in the demand for a certain good in response to persistent high prices or limited supply. Because of persistent high prices, consumers may decide it is not worth purchasing as much of that good, or seek out alternatives as substitutes.”

Investopedia notes the term has most often applied to energy commodities and related goods.

In fact, according to James Thornhill of Bloomberg, demand destruction may hit electric cars because of the rising price of lithium carbonate—a key ingredient in the batteries that are the most expensive part of electric vehicles (EVs). Battery prices have been dropping consistently for years as the manufacturers got better at it and the designs improved, but that appears to be over thanks to the fivefold increase in the price of lithium in the last year. American bank Morgan Stanley notes in a report:

This is a particularly big problem in China where battery manufacturers buy on the spot market, unlike Tesla which Morgan Stanley says can weather this storm. It still writes that overall electric car prices could rise by 15% as manufacturers pass through the increased costs.

Meanwhile, Tesla founder Elon Musk notes his companies are getting hit by inflation pressure on raw materials and logistics. He continues: “And we are not alone.”

And it is not just lithium: Nickel is a big part of batteries, and its price has doubled because of the war in Ukraine; Russia is a major supplier. Quartz reports, “The war in Ukraine is causing commodities with Russian exposure to surge, and the price increases could spell trouble for electric vehicle (EV) manufacturers already struggling to keep costs down in the face of supply chain disruptions.”

“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,” analyst Gregory Miller told Reuters, in reference to market-dominating ICE vehicles.

And then there is cobalt, which Green Car Reports says is surging in price. Inside EVs quotes a study claiming that “by the end of 2022, the price of raw materials that go into some EV battery packs could go up by as much as $8,000 per vehicle.”

Of course, there is a solution to this problem: Make electric vehicles lighter and smaller.

The bigger and heavier the car or pickup truck, the bigger the battery, and the bigger the cost increase. Blake Shaffer of the University of Calgary made some suggestions in a study, published in Nature, and covered in Treehugger:

  • Tax heavy cars. This will annoy those who believe we should be doing everything possible to promote electric vehicles, but charging fees on the basis of vehicle weight might discourage the purchase of heavy vehicles. Shrink batteries. Shaffer notes that most trips are short, far less than the maximum range of batteries, so why push around all the extra weight?Drive less. “Policies should ensure that alternatives such as walking, biking and public transport are safer, more convenient, accessible, affordable and reliable. Urban designers should consider the impacts of zoning and development on driving patterns to minimize average distances traveled.”

But the market may do this anyway; a Nissan Leaf has a battery that’s just over a quarter as big as a Ford Lightning, and the increase in cost will be proportionately less. The auto companies might have to pivot the way they did in the ’70s and stop making giant pickup trucks and move to cars as small as the VWs and Tesla Model 3s.

I have often complained about the weight of these vehicles. From an earlier post, “Do Size and Weight Matter in an Electric Car?”:

And now we are finding the amount of stuff we use significantly affects the cost of these vehicles. It’s time for a rethink and a resize, or the electric car market might suffer significant demand destruction. And of course, I have to note that it’s time for an e-bike.