While electric vehicles (EVs) have gone a long way since the first Tesla Model S appeared in the early 2010s, there’s still a lot of work to be done so they can be adopted by everyone. Important improvements in range, charging infrastructure and pricing are essential to convince even the more skeptical of buyers. Meanwhile, carmakers are pumping a great amount of resources into their advancement because, well, they want to sell their EVs.
The price of batteries, however, remains a core topic of discussion by carmakers as they race for the next affordable EV. The resources required to build these batteries are expensive, building them is expensive and so is replacing or repairing them. For now. Because we’ve seen consistent drops in battery prices over time, which has helped the industry churn out more compelling EVs at attainable prices. But according to BloombergNEF’s annual battery price survey, 2024’s price drop was the biggest annual decline since 2017, which is fantastic news for the future of EVs.
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According to BNEF’s survey, which analyzed 343 data points from a range of applications including electric cars, buses and commercial vehicles, the average price per kilowatt-hour has dropped 20% this year, bringing it down to an impressive $115. There are several reasons for this, such as metal prices dropping caused by less demand, but also the expanded use of LFP (for lithium iron phosphate) technology for EVs, which reduces the costs of materials used due to the absence of cobalt.
Tesla is a big proponent of LFP batteries, and so is Ford. More and more carmakers are hopping onto that bandwagon as well for cost-efficiency, but also to free themselves from the geopolitical controversies associated with cobalt mining.
But an overcapacity in cell production also contributed to lowering the cost of batteries. Over the past few years, we at TopSpeed have reported on several new battery plant announcements from carmakers as well as battery makers. We’re slowly seeing the fruit of these efforts in an attempt to scale down battery mass-production to lower costs.
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EV Batteries Could Soon Be Cheaper To Build Than Gasoline Engines
Interestingly enough, the price of EV batteries is going down so fast, that it could fall at similar levels as the price of internal combustion engines (ICEs) as soon as 2026. This would represent a battery cost that would sit below the $100/kWh threshold often referred to as the point of price parity between EVs and ICEs.
The Chinese auto industry is actually ahead of us on this one. According to the study, the average battery cost in China is below that of ICEs. It’s also the world’s main producer of EV batteries. By the end of this year, China is expected to have produced enough battery cells to meet 92-percent of total global demand, which equates to 1.2 terawatt-hours for EV and stationary applications.
Such a furious manufacturing might puts pressure on smaller players forced to lower cell prices and cutting margins for market share. But it’ll be good news for new EV buyers looking to pay less for their cars. Thanks to pricing and volume data collected since 2010, BNEF expects battery prices to reach the $69/kWh mark by 2030.
But geopolitics and changes in policy such as tariffs on foreign-built EVs are disrupting this timeline, and the current oversupply of batteries is also linked to a generalized cooldown in new vehicle sales. If demand continues slowing, EV suppliers will also most likely slow down production, which could slow down this rapid price drop.
