Construction costs for electric vehicles can hardly be reduced

The cost of building a battery-powered truck will "forever" be higher than that of a vehicle with an internal combustion engine, the boss of the world's largest truck manufacturer Daimler has warned, as the war in Ukraine is accelerating the already rapid rise in the price of key raw materials.

"If you take the entire engine, transmission, axle, tank system and cooling system...", said Daimler Truck CEO Martin Daum, "we have a maximum of around 25,000 euros [of material in a truck with an internal combustion engine]. "

"How much battery do you get for 25,000 euros? Even if [battery costs drop to] 60 euros per kilowatt hour and I need 400 kilowatt hours, for the battery cells alone [in a single truck] I need 24,000 euros".

He added that it is up to governments to make up the difference, whichever mechanism they choose. "Without subsidies... the price of an [electric] truck will always be higher than a truck with an internal combustion engine.

Daum's comments come after Daimler Truck, which was an early entrant in the electric mobility space and has been making battery-powered vehicles since 2017, reported that it more than tripled sales of zero-emission trucks and buses last year to a total of 712.

However, that is only a fraction of the 455,000 trucks and buses that the company delivered in total in 2021.

The long-distance eActros model, which went into production last year, still costs three times as much as its internal combustion engine counterpart, and this difference is unlikely to narrow significantly in the near future.

According to IHS Markit, the costs of the most important raw materials used in modern batteries have risen sharply in the past year: cobalt and lithium have more than doubled, nickel has become almost 40 percent more expensive.

As a result, battery pack prices, which fell to an average of $132 per kilowatt-hour in 2021, according to a survey conducted by BloombergNEF, are expected to remain above the $100 mark through at least 2024.

Daum, who has joined other industry bosses in calling for a carbon tax to narrow the cost differential between internal combustion engine trucks and battery-powered models, said he nonetheless supports the German government's efforts to help companies deal with rising diesel costs.

"We have to raise the price over time," said the manager, "we can live with two or three euros per liter, but we can't live with it if it happens overnight."

Daimler Truck, whose longstanding strategy has been to operate both battery-powered and hydrogen-powered trucks, could focus more on the latter if battery costs continue to rise and raw materials remain scarce, Daum said.

"With the fuel cell, we have far fewer rare raw materials," he said, "and we're not competing with millions of cars for the same material."

Daum praised German Economy Minister Robert Habeck for signing an agreement with Qatar last week for the supply of hydrogen and liquefied natural gas.

However, he criticized the Brussels antitrust authorities for delaying approval of a joint venture between Daimler and its main competitors Volvo and Traton, which plans to spend 500 million euros to set up a network of 1,700 truck charging stations in Europe.

"We're willing to put the money into it," he said, "we have someone willing to take on the CEO role and she can't do it because we don't have the approval.

"That should have happened three months ago. We should have become operational.