Comment by npongratz | Hacker News Reader

Comment by npongratz | Hacker News Reader

Higher demand causes lower prices? From the article:

> "But a battery electric car needs so much battery capacity—40 to 100 kWh, thousands of times more than a smartphone—that they've significantly increased the global demand for lithium-ion batteries. That has helped drive additional price declines, which have started to make it cost-effective to use batteries to improve the electric grid."

You need to know both demand and supply to forecast price effects when either or both change. The simplistic assertion that higher demand leads to lower prices is wrong on its face.

I'm no expert, nor an economist, but I think it'd be more correct to say that higher demand inspired investments that resulted in more supply, which grew faster than demand, thus driving price declines.

EDIT: Another inconsistency that bugs me:

> "Frith told Ars that a common battery technology in the last decade was "NMC 111" batteries with equal parts nickel, magnesium, and cobalt. Now companies are starting to move to NMC ratios of 811—with eight times as much nickel as manganese or cobalt. Nickel is two to five times cheaper than manganese or cobalt, so a formula with more nickel is cheaper to produce per kg."

So does the "M" in NMC refer to magnesium (as stated first), or manganese (as stated second)?

Over the long run, higher demand can absolutely lower prices.

In the short-term, obviously higher demand increases prices if production is held constant.

But if there's no obvious constraint on production (e.g. on resources/land/employees/etc.) then yes, over the long-term higher demand usually generates larger-scale businesses/factories which can invest in more efficient production and produce lower prices, and pay off initial investments.

Of course, this won't apply if there aren't further economies of scale or investments to recoup.

The article seems to be quite clear that this is what it's talking about. I don't think it's making the "simplistic assertion" you're assuming it is -- it's just referring to the concept of economy of scale which most people are familiar with.

The M in both NMC 111 and NMC 811 should be manganese. It's also a mistake that nickel is "cheaper than manganese or cobalt". It is certainly cheaper than cobalt, but much more expensive than manganese. It's still better, since cobalt is quite expensive and there can be some ethical issues with the supply chain of cobalt, but if it were possible to make NMC 181, that was mostly manganese, it would be better.

As for your first point, higher demand typically causes higher prices in the short term, then often lower prices in the medium term due to oversupply of investment, and eventually lower prices in the long term, due to economies of scale.

I'd say higher demand led to more R&D. Supply alone wouldn't drive the price declines, as it used to cost too much to produce high battery capacity so there was a price floor. As demand increased, justifying the R&D helped break down that floor. That and government dollars.

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