Lower Graphite Production in China Could Raise Electric Vehicle Battery Costs

Graphic of an electric car charging station.

In another hurdle for the electric vehicle battery industry, China is forcing graphite producers to shut down as the country attempts to mitigate pollution, according to an Axios article.

Lower production levels mean a reduction in supply, which could cause battery prices to rise since graphite is used in batteries’ anode materials. China produces nearly three-quarters of the world’s graphite supply and batteries make up 30% of global demand for graphite.

High prices for the materials that go into lithium-ion batteries, are the big reason why electric vehicle companies – like Tesla – have difficulty reducing the cost of their cars. Cobalt and lithium are often cited as the main reasons for the elevated prices, but now graphite is entering the discussion.

The issue is tricky to navigate because China is doing this to reduce its pollution levels, which is overall beneficial for the environment. Indeed, the country has been cracking down on all mining activity over the past few years because of its severe environmental impact.

But as China reduces its carbon footprint, other countries will have to deal with higher prices for items meant to lower their carbon footprint, like electric vehicles. Higher prices for electric vehicles mean consumers will be less inclined to purchase them and will stick with combustion-engine vehicles.

Graphite production is spreading to other countries, including Madagascar, Namibia and Tanzania, but it will take a while for them to ramp up production. In addition, these countries will also likely experience higher levels of pollution as they ramp up graphite production.

Electric vehicle producers will likely incentivize these countries to ramp up production as quickly as possible so their costs don’t spike. That might help these countries economically, but it’s a shame that more mining will likely lead to increased pollution.