Prices of EV Batteries Poised to Drop by Almost 50%

Goldman Sachs Research has revealed that prices of electric vehicle batteries could fall by nearly 50% in the next a year and a half due to various technological advances. These advances allow manufacturers to develop EV batteries with more capacity without increasing their weight, allowing electric cars to travel further on a single charge.

Coupled with a drop in the price of metals used to develop EV batteries, Goldman Sachs Research explains that these advancements will result in a larger-than-expected fall in battery prices. On average, global EV battery costs fell from $153 per kilowatt-hour (kWh) in 2022 to $149 last year. Goldman Sachs Research now predicts that battery prices will continue their downward trend until they are $111 as 2024 draws to a close.

Furthermore, Goldman Sachs Research projects that prices will drop to $80/kWh by 2026, a nearly 50% drop from 2023 prices. As the battery accounts for most of an electric vehicle’s cost, such low battery prices would make electric cars as affordable as internal combustion engine (ICE) vehicles. This would solve the largest barrier to EV ownership — cost — and allow for mass electric-vehicle adoption without the need for subsidies.

Goldman Sachs Research’s Asia-Pacific Natural Resources and Clean Energy Research cohead Nikhil Bhandari says innovations in technology have allowed for a 30% increase in EV battery efficiency and lower costs. Additionally, metals such as cobalt and lithium, which are critical to EV battery development, have seen a notable fall in recent months. These metals typically account for up to 60% of EV battery costs.

Battery-structure innovations are primarily behind the increase in EV battery density, Bhandari explains. Manufacturers are building larger battery cells and implementing cell-to-pack rather than packing small modules comprised of small cells into battery packs. Getting rid of modules allows for a simpler structure that saves space while increasing energy density, he explains.

While lithium-based batteries currently dominate the market, Bhandari notes that solid-state batteries have the potential to be a “game changer” in the future because they offer higher energy density and safety levels. Traditional EV batteries use a liquid electrolyte that increases the risk of overheating and fire. Although electric vehicle fires are rare, they are much harder to put out than regular fires.

Solid-state batteries, on the other hand, replace the liquid electrolyte with a solid one. Unfortunately, scaling issues have hindered their entry into the mass market. New battery chemistries, including solid state and sodium-ion, are predicted to capture around 5%–10% of the EV battery market, with lithium-ion chemistries retaining most of the market.

As battery prices drop, we are likely to see various EV models from numerous manufacturers such as Cenntro Electric Group Ltd. (NASDAQ: CENN) becoming more commonplace on roads in comparison to ICE vehicles.

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