If one obstacle to electric-car adoption is the cost of the batteries, a new survey finds those costs are going down.
The price of lithium-ion battery packs has dropped 14% to a record low of $139 per kWh, according to analysis by research provider BloombergNEF. (BNEF is “a research organization that helps energy professionals generate opportunities,” the firm says on its website.)
BNEF attributed the price drop to falling prices for raw material and components as production capacity increased across all parts of what it called the battery value chain, while demand growth fell short of some industry expectations.
The survey says demand for EV batteries should grow 53% year-on-year. A plateaued demand for EVs and subsequent slowing of demand for lithium-ion batteries was also responsible for the lower prices, BNEF said. The cost of raw materials for the batteries fell as well.
“In the many years that we’ve been doing this survey, falling prices have been driven by scale learnings and technological innovation, but that dynamic has changed,” said Evelina Stoikou, energy storage senior associate at BNEF and lead author of the report.
“The drop in prices this year was attributed to significant growth in production capacity across the value chain in combination with weaker-than-expected demand.”
The BNEF Electric Vehicle Outlook report pegs EV sales at 18% of the market worldwide and says the size of the EV fleet is almost 41 million vehicles. China leads in all categories of EV adoption, with Europe second and the US third.
The survey is not solely about batteries used in electric cars, but buses and storage devices, too. Still, BEVs got the lion’s share of the price reduction.
“Battery-electric vehicle (BEV) pack prices were $128/kWh on a volume-weighted average basis in 2023,” BNEF said. “At the cell level, average prices for BEVs were just $89/kWh.
This indicates that on average, cells account for 78% of the total pack price. Over the last four years, the cell-to-pack cost ratio has risen from the traditional 70:30 split. This is partially due to changes to pack design, such as the introduction of cell-to-pack approaches, which have helped reduce costs.”
Prices were slightly lower in China, at $126/kWh, while packs in the US and Europe were 11% and 20% higher, respectively, according to the survey.
Another battery chemistry, lithium iron phosphate (LFP), meanwhile, continues to be an even lower-priced alternative to lithium ion. LFP battery packs and cells had the lowest global weighted-average prices, at $130 per kWh and $95 per kWh, respectively, BNEF said.
“This is the first year that BNEF’s analysis found LFP average cell prices falling below $100/kWh. On average, LFP cells were 32% cheaper than lithium nickel manganese cobalt oxide (NMC) cells in 2023,” according to the survey.
LFP cells also offer other advantages: They almost never catch fire, they have a long life cycle, high power density and are more environmentally friendly, being made up of iron instead of the cobalt and other elements found in lithium ion cells.
LFP batteries are also lighter. Their biggest drawback may be lower performance in very cold temperatures.