EV Makers Face Margin Pressure Amid Rising Raw Material and Chip Costs

Electric vehicle (EV) manufacturers are experiencing increased margin pressure due to rising raw material prices and supply chain disruptions. The demand for AI infrastructure is straining the automotive supply chain, particularly for memory chips used in vehicles and battery systems. This situation has led to higher costs and potential price hikes, as companies reported during earnings calls for the quarter ending March.

Key Highlights

• EV makers report rising costs for lithium, memory chips, and key metals
• Lithium prices surged from $8 to $24 per kilogram in a short period
• Ather and Revolt Motors implemented price hikes to offset higher input costs
• AI-driven demand has raised RAM and DRAM chip prices by 2-4 times
• Supply chain disruptions and commodity inflation impact EV industry margins

Rising Costs and Supply Chain Disruptions

EV makers such as Ather Energy, Revolt Motors, Euler Motors, and Ultraviolette have reported significant increases in the costs of lithium-ion cells, rare earth magnets, memory chips, and key metals. Prices for battery materials like lithium, nickel, and cobalt, as well as aluminum, copper, steel, and plastics, have all risen. Lithium prices have surged from about $8 per kilogram to nearly $24 in a short period. Lithium-ion cells have become 30-50 percent more expensive depending on sourcing timelines, according to industry executives.

Commodity inflation is estimated to impact costs by around 3.5-4.0 percent for the quarter. Bill of material inflation is running in the high single digits. Companies have warned of near-term margin pressure as commodity and electronic component prices remain elevated.

Company Responses to Cost Increases

Ather Energy CEO Tarun Mehta stated that the company has already implemented blended price hikes of nearly Rs 4,000 this year and may introduce further increases. Ather also reported LPG shortages, manpower migration, and outbound logistics disruptions, affecting its ability to meet demand by 10-15 percent in the current quarter. The company has partially passed on cost increases through price hikes since April 1.

Revolt Motors' CFO Dinesh Thapar noted inflation across steel, copper, aluminum, and noble metals due to event-led supply shocks. The company has raised prices by about 2 percent across products, amounting to Rs 700 to Rs 3,500, but these increases do not fully offset higher bill-of-material costs. CFO Vivek Anand highlighted that the broader economy faces short-term uncertainties from developments in West Asia, impacting commodity costs.

AI Demand Drives Memory Chip Shortages

Industry executives report that prices of RAM and DRAM chips have risen two to four times in some cases as manufacturers shift production towards AI applications. Niraj Rajmohan, cofounder of Ultraviolette Automotive, said memory-linked components have seen the biggest impact recently. Saurav Kumar, founder of Euler Motors, stated that lithium prices could impact overall vehicle costs by around 4 percent going forward.

Manufacturers have absorbed most of the cost increases but may pass some of the burden to customers through future price hikes. Ather Energy said its upcoming EL scooter platform uses steel frames and simpler transmission systems to reduce reliance on expensive commodities like aluminum and copper.

Outlook for the EV Industry

EV companies expect ongoing disruptions in fuel and gas supplies to influence consumer behavior, with more buyers considering electric vehicles for long-term savings. The industry continues to navigate short-term uncertainties as supply chain pressures and commodity price volatility persist.

Also Read: Gujarat sees surge in electric vehicle sales amid rising fuel prices

CarBike 360 Says

As input costs continue to rise, EV manufacturers must balance affordability with profitability to sustain growth. Strategic sourcing, localized production, and technological innovation will be critical in navigating these pressures. While demand for electric vehicles remains strong, the road ahead will depend on how effectively automakers manage costs without compromising competitiveness in an increasingly crowded market.