Should the current rally morph into a supercycle, rising car prices could forebode inflation across the board. Analysts at JPMorgan Chase & Co. estimate the price of an auto’s raw materials have climbed 83% in the year through March. Those pieces typically make up about 10% of the cost of building a vehicle, meaning the price tag for a $40,000 car would have to increase 8.3% to offset the rally, analysts for the bank wrote.

“We’re definitely feeling the commodity headwind,” Jim Farley, chief executive officer of Ford Motor Co., said last week. “We’re seeing inflation in a variety of parts of our industry, kind of in ways we haven’t seen for many years.”

Carmakers usually struggle to pass on higher costs, but demand is booming as major economies reopen and many consumers continue avoiding public transportation. The global semiconductor shortage also is inhibiting production, keeping inventory tight and driving up vehicle prices.

In the U.S., car supply is so limited that rental companies are resorting to buying used vehicles at auction rather than new ones.

The main contributor to higher commodity costs hitting the industry is the steel needed for chassis, engines and wheels. The metal’s recent rally has smashed records as China — by far the biggest producer — took measures to curb output.

The boom in copper prices adds to the costs of electric vehicles just as the industry implements an energy transformation to meet tighter emissions standards. EVs use nearly 3 1/2 times more copper than gas guzzlers because of the larger amount of wiring inside, according to consultancy Wood Mackenzie Ltd.

Cars Make a Covid Comeback, and That Means Burning More Oil

The increases may hurt automakers like Tesla Inc. and Volkswagen AG that are trying to make EVs more price-competitive with traditional cars.

They also may encourage automakers to explore alternative chemistries for their EV batteries. The majority of cells use some combination of lithium, cobalt and nickel, which have jumped a minimum of 47% each in the past 12 months.

Ford and BMW AG were among those investing $130 million this month in battery startup Solid Power Inc., which is working on cells that would remove the need for those metals, leading to a 10-fold decline in power pack costs.

“They are looking to spread that risk,” said Caspar Rawles, head of price and data assessments at Benchmark Mineral Intelligence. “There is no hedging for lithium or cobalt.”

BMW expects headwinds from rising commodity prices of as much as 1 billion euros ($1.2 billion) for the year, Chief Financial Officer Nicolas Peter said Friday during an earnings briefing. The luxury-car maker singled out rhodium, steel and palladium as particular worries in the coming months.

Longer term, BMW is working to be less exposed to price squeezes in key raw materials. From 2025, the automaker plans to produce vehicles on a new architecture that will allow recycling of materials such as steel, aluminum and plastics to make new cars.

“We’re seeking partnerships” to refine the necessary technologies, BMW CEO Oliver Zipse said.

Jeep maker Stellantis NV — formed from the merger of Fiat Chrysler and PSA Group –- said it needed to recover some of its higher costs, and the marketplace is supportive, so far.

“It’s hard to imagine a better environment with which to pass through the impact of supply shock and price inflation to consumers who are effectively lining up to take delivery of their new car off the car carrier,” analysts at Morgan Stanley wrote in a note. “It’s a seller’s market in autos.”