High Copper Prices To Pose Challenges For EV Players The rise in the red metal price will force manufacturers either to absorb the costs, reduce profit margins or increase vehicle prices.

Analysts have predicted a seven to eight per cent increase in copper prices in the current financial year and it has given another worry to electric vehicle industry which is already grappling with the poor number of sales from the past few months.

The rise in the red metal price will force manufacturers either to absorb the costs, reduce profit margins or increase vehicle prices.

"Our expectation is that copper prices will increase by 7-8 percent for the full year," Sumit Jhunjhunwala, Assistant Vice President & Sector Head - Corporate Ratings at ICRA, said. "India saw an 11 per cent demand increase last year, and we expect similar growth this fiscal year due to ongoing projects in renewables and infrastructure."

A strong pipeline of renewable and infrastructure projects will keep copper prices higher, with the demand for industrial metal expected to rise 10-11 per cent over the previous year.

The increase in copper prices presents challenges for the electric vehicle (EV) industry, as copper is a critical component for electric motors, batteries, inverters, wiring and in charging stations. Higher copper costs will undoubtedly lead to an immediate increase in component expenses, which will impact the overall cost of EVs. However, it's important to note that the EV market and pricing is influenced by a variety of factors beyond raw material costs, including technological advancements, government incentives, and consumer demand for sustainable transportation solutions, Saket Sapra, MD, Dana TM4 India and Head, Electrification, India and Southeast Asia said.

Copper is vital component in electric vehicles as it is essential in stator windings, battery management systems and wiring, underpinning the metal's durability, malleability, and superior conductivity, essential for these vehicles and their charging infrastructure.

Ajinkya Firodia, MD, Kinetic Engineering said that It may lead to a slowdown of the EV adoption rate in India, especially among budget-conscious consumers.

"The rise of copper prices is a concern for the refinery industry governing the Indian electronic vehicle space. Copper is a very important material that is used in electric vehicles, and its elevated price would certainly affect the general production costs. It may lead to a slowdown of the EV adoption rate in India, especially among budget-conscious consumers. Nevertheless, things are looking up. We have observed some innovations in EV settings under which the amount of copper used per vehicle has been decreasing. Also, the Indian government's EV uptake study, which is carried out through subsidies and incentives, can help mitigate the copper price increase impacts. The collaboration between the automakers, suppliers of components, and the government is the major thing to combat this issue and to ensure the growth of the EV sector in India," Firodia added.

Subhabrata Sengupta, Partner, Avalon Consulting said that EV uses approx. 50-60 kg more copper per vehicle than ICE. Thus a 60-70 INR per kg increase in Copper prices as expected will result in a 3-4K disadvantage of EV vis-a-vis ICE.

"This does not help, but this alone is not going to make a significant dent in the relative cost economics. Much greater issue is sorting out the demand side hurdles - the FAME 2 subsidy fiasco that is dragging on, expected clarity on subsidy, charging infra issues etc. A lot is being made of the y-o-y degrowth but we need to remember that last year we had a bit of a high due to customers advancing their purchase in anticipation of subsidy removal, and now, people may be delaying their purchase in anticipation of FAME 3," he added.

In the June quarter, EV sales contracted 7 per cent from the year-ago period to 346,024 units, data from the Ministry of Road Transport and Highways' VAHAN portal shows.

The drop in sales would make it difficult for manufacturers to raise prices in the foreseeable future, experts said.

Dr. Amitabh Saran, CEO & Co-Founder, Altigreen said that Cu (Copper) is largely used in two places, including winding of motors, and in busbars. In some cases, the rotor of the motor is also diecast in Cu but not very often.

"Windings in a motor are typically in the stator, whic depending on the topology of the motor, could range from 0.5 per cent to around 1 per cent of total vehicle cost," he added.

He further said that busbars are used in the high power components of the EV drivetrain, including battery and motor controllers. "Sometimes flexible busbars are also used, which are primarily in Cu. The industry is moving towards Aluminium busbars (sometimes Tin plated), but assuming 99.9 per cent grade Cu only, it would be another 0 5 per cent cost of the vehicle. Additional variability of 0.5% has been added in case the rotor is of Cu," he said.

Globally, EVs continue to face headwinds with overall sales expected to decline 2 per cent in 2024 from the previous year. Analysts attribute this to rising concerns around EV costs due to lower resale value for used vehicles

Speaking to Entrepreneur India, Samkit Shah, Co-Founder, Jitendra EV said that surge in copper prices is expected to significantly impact the electric vehicle (EV) industry by increasing production costs. As a key component in EV manufacturing, higher copper prices may lead to increased consumer prices or reduced profit margins.

"Manufacturers might explore alternate materials or methods that minimise copper use, but such transitions may be expensive and time-consuming. In general, while copper price rises have a substantial influence on EV sales and manufacturing, strategic adaptations and market adjustments will undoubtedly play an important part in determining the industry's destiny in the coming months,'' Shah added.

Meanwhile Rahul Goenka, Director, ElectroRide said that increased pricing of raw material will make the product out of reach for the customers. While copper has many more usage outside of EV industry, government should enhance support to the end customer and also work on a highly efficient recycling process.