Credit Suisse believes the price of lithium is set to reduce, and with it, the cost of electric cars, with the chemical element a core component of EV batteries.

Currently, the demand for lithium far outweighs supply. But with more lithium mines being built it is anticipated that supply will be ramped up, and prices will drop.

The market price of lithium currently sits at $8,300 a tonne, with Credit Suisse projecting that price will be slashed by more than half to $3,470 a tonne. Bell Potter and Goldman Sachs also forecasted that prices would drop to a similar level, which saw lithium miner stocks plummet on the ASX.

Federal Government predictions outline that Australia’s production of lithium is set to triple within four months. Simon Iacopetta, the CFO of Core Lithium, who recently began construction of a lithium mine in Darwin, believes the reduction in price will not be as big as predicted.

"We expect the shortfall of supply or new products coming to market to result in a continued strengthening of (prices) for the near term," he tells the ABC. 

"We should be selling into a fairly positive price environment and generating healthy margins.”

Core Lithium has two buyers from China on their books and also has a deal with Tesla. 

"There's been many opportunities to celebrate and that was one. I think the shift to decarbonisation is gaining momentum and will continue to do so."

Saul Kavonic from Credit Suisse says that the high price of lithium may stick around for longer than anticipated.

"Those margins are not sustainable. They will come down in time. We can have a debate about 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."

"Any (price reduction) 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.”

"(That is) 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."