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Battery prices continue to fall thanks to cheaper metals and increased scale, which squeezes manufacturers margins. Prices are expected to continue to fall over the next decade.
Battery prices experienced their biggest annual drop since 2017, with lithium-ion battery prices falling 20% ??from 2023 to a record low of $115/kWh, according to an analysis by BloombergNEF (BNEF).
Factors driving the decline include excess cell manufacturing capacity, economies of scale, low metal and component prices, adoption of lower-cost lithium iron phosphate (LFP) batteries, and slowing growth in electric vehicle (EV) sales.
Excess capacity is currently widespread, with 3.1 TWh of fully operational battery cell manufacturing capacity worldwide. This is more than 2.5 times the annual demand for lithium-ion batteries in 2024, according to BNEF.
“The fall in battery prices this year has been greater than that of metal prices, indicating that battery manufacturers’ margins are shrinking. Smaller manufacturers are under particular pressure to lower battery prices to fight for market share,” said Evelina Stoikou, head of BNEF’s battery technology team and lead author of the report.
The figures represent an average of different geographical areas and multiple application areas, including different types of electric vehicles, buses and storage projects.
By region, average battery prices were lowest in China, at $94/kWh. Prices in the U.S. and Europe were 31% and 48% higher, reflecting the relative immaturity of these markets as well as higher production costs and lower volumes, according to BNEF.
Price differences between North America and Europe and China were larger than in previous years. This indicates that the price decline was more pronounced in China, forcing many battery makers to enter new markets, including energy storage, while also eyeing overseas markets willing to pay more for batteries.
Meanwhile, battery electric vehicle (BEV) prices stood at $97/kWh, crossing the $100/kWh threshold for the first time. While EVs have reached price parity in China, they are still more expensive than comparable combustion cars in many markets, but this is expected to change in the coming years.
The sector has also benefited from low commodity prices. BNEF expects metal prices to rise in the coming years as geopolitical tensions, tariffs and low prices hold back new mining and refining projects.
“One thing we are seeing is how new tariffs on finished battery products may lead to distorting price dynamics and slow demand for end products. In any case, the increased adoption of LFP chemistries, continued market competition and improvements in technology, materials processing and manufacturing will put downward pressure on battery prices,” said Yayoi Sekine, Head of Energy Storage at BNEF.
BNEF expects battery prices to fall by $3/kWh by 2025, according to its near-term outlook. Looking ahead, further price declines are expected over the next decade thanks to continued investment in R&D, improved manufacturing processes and capacity expansion across the supply chain.
In addition, analysts expect that next-generation technologies such as silicon and lithium metal anodes, solid-state electrolytes, new cathode materials and new cell manufacturing processes will play an important role in enabling further price reductions in the coming decade. |
