The price of battery cells has dropped by half in a year, as the companies producing them battle with overcapacity and cut prices to retain market share.
The factors driving a 51 per cent drop in the price of battery cells – as reported by BloombergNEF (BNEF) analysts – include a drop in the price of raw materials such as lithium, and lower than predicted demand from the global transition to electric cars, which is happening more slowly than the battery industry hoped.
The result already being felt in China, is that cars with electric powertrains are now priced “at or below combustion cars in most vehicle segments” and significant electric car price reductions are heading our way, too.
“Almost two-thirds of EVs available in China are already cheaper than their internal combustion engine equivalents,” BNEF reports, “and many cheaper electric cars are planned for launch outside China in 2025 and 2026”.
The forecaster recently estimated that global demand for lithium-ion batteries in 2023 was approximately 950 gigawatt hours in 2023, while global production capacity – much of it in China – was already more than double that figure. According to the analysts’ predictions, efforts in the West to develop battery production capabilities to match China, will only deepen the overcapacity issue.
It’s good news for consumers, says BNEF, which reckons lower prices will filter through into cheaper electric car models scheduled for production in the next couple of years.
While lower prices for EVs might typically be thought to increase demand, and therefore lead to a bounce back in the global price of batteries, the Bloomberg analysis suggests there are other factors at work that point to lower prices for some time to come. Most significant, they suggest, is the fact that Chinese companies and others around the world are continuing to invest large sums in research and development, automated production and new factories. BNEF says it expects “low prices to persist for at least the next several years” as a result.
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