The cost of electric cars could start to fall as the price of a core component in EV batteries is expected to reduce, according to market analysts Credit Suisse.
Lithium is not only used in EV batteries but also in home solar storage and big batteries.
The market price of the mineral's raw ore has soared to about $US6,000 ($8,300) a tonne as the shift to renewable energy accelerates at a time when supply is still trying to catch up.
"Prices have gone through the roof," Credit Suisse head of energy resources research Saul Kavonic told ABC News.
"The scarcity we're seeing in lithium right now is fundamentally not a good thing.
But now many more lithium mines are being built, including in Australia.
"We've seen a lot of new mines being brought into production, incentivised by the high prices," Mr Karovic said.
And the cumulative effect of all those mines chasing after a boom may just see them get much less for the hard white mineral they dig up.
Credit Suisse is among several firms that have just revised down their price forecasts for lithium as more supply hits the market, and as demand for batteries doesn't take off as quickly as predicted as key markets like China grapple with a looming economic downturn.
By the end of next year, Credit Suisse now predicts the spot price to dive by half to $US2,500 ($3,470) a tonne.
"We actually might see the market return to balance or even a surplus over the next 18 months," Mr Karovic said.
Credit Suisse is not the only market analyst forecasting a drop in lithium prices.
Last week, lithium miner stocks on the ASX dived as a range of major firms including Bell Potter and Goldman Sachs put out revised forecasts on pricing.
Goldman Sachs is forecasting a "sharp correction" in lithium prices, according to media reports.
Macquarie Group's forecast is less bullish, with its analysts believing that prices will stay higher for longer due to demand for electric cars still rising. However, it also believes prices for lithium in China have hit a peak.
Declining prices have big ramifications for Australia's economy, and taxes from mining revenue.
We are already the world's biggest exporter of lithium and production is expected to triple within four years, according to federal government forecasts from March.
Core Lithium is one of the new mines here under construction.
The ASX-listed company made the call to go ahead with the mine near Darwin at the end of last year, when lithium prices were starting to really take off.
Chief financial officer Simon Iacopetta believes the price drop forecasts by Credit Suisse and Goldman Sachs are overstated.
"We expect the shortfall of supply or new products coming to market to result in a continued strengthening of [prices] for the near term," Mr Iacopetta said.
However, Mr Iacopetta told ABC News that the mining project's feasibility was based on a long-term forecast of prices coming down to as low as $1,000 for the spodumene concentrate lithium ore that it sells to market.
"We should be selling into a fairly positive price environment and generating healthy margins," he said.
Core Lithium has locked in two buyers in China. It is also one of several mines across Australia that has signed early deals with one of the biggest names in batteries, Tesla.
"There's been many opportunities to celebrate and that was one," Mr Iacopetta said.
"I think the shift to decarbonisation is gaining momentum and will continue to do so."
Dropping mineral prices could make EVs more affordable
Credit Suisse's Saul Kavonic said no miner could count on an ongoing boom, and that those still striking ground should be assessing their future viability.
"For miners who are still pre-production, there's clearly risk profile going forwards," Mr Kavonic said.
"The Australian lithium miners are doing absolutely fantastically. They are seeing record margins beyond the wildest dreams the industry could have had only 12 months ago.
"Those margins are not sustainable. They will come down in time. We can have a debate how well that timing is but they will have to come down.
"But it should be remembered that Australia's lithium miners are very productive, low-cost mines that should be able to survive through the cycle."
Dropping prices is a good thing, Mr Kavonic added.
"Any [price relief] is going to bring down the cost of batteries, and bring down the cost of electric vehicles, which is going to help the rollout of electric vehicles globally," Mr Kavonic said.
"[That's] ultimately going to have positive movements on the trajectory towards the decarbonisation goals, and net zero by 2050, which many countries in the world have signed up to."
Australia's lobby group for electric car uptake agrees.
"We do expect that that fall in mineral prices will contribute to the falling price of electric vehicles," Electric Vehicle Council chief executive Behyad Jafari said.
"As we have seen the price of those lithium-ion battery packs reduced, we've seen the price of electric vehicles reduced as a result. That had somewhat slowed down and we'd expected it to slow down as there was a bit of a supply crunch with the minerals.
"But again, as the capacity of the mining and refining of those minerals has increased, we're now seeing that prices are starting to reduce again."
