EV battery prices set to fall below $99/kWh
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The price of batteries for electric vehicles is set to fall below the strategically important point of $99/kWh by 2025 says a report by analysts Goldman Sachs
This has replaced concern over higher materials costs and global supply chain issues for EV battery packs.
Goldman Sachs Research now expects battery prices to fall to $99 per kilowatt hour (kWh) of storage capacity by 2025 — a 40% decrease from 2022.
The fall will see the EV market achieve cost parity, without subsidies, with internal combustion engine (ICE) vehicles around the middle of this decade on a total-cost-of-ownership basis.
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The analysis estimates that almost half of the decline will come from declining prices of raw materials such as lithium, nickel, and cobalt. Battery pack prices are now expected to fall by an average of 11% per year from 2023 to 2030, says Nikhil Bhandari, co-head of Goldman Sachs Research’s Asia-Pacific Natural Resources and Clean Energy Research.
“The reduction in battery costs could lead to more competitive EV pricing, more extensive consumer adoption, and further growth in the total addressable markets for EVs and batteries,” says Bhandari.
The new phase in the EV roll out is more heavily influenced by consumer adoption than government largesse as battery prices drop. The team’s base case estimate for global EV penetration jumps to 17% in 2025 from just 2% in 2020, and to 35% and 63% by 2030 and 2040, respectively.
A “hyper adoption” scenario sees EVs accounting for 21% of total global vehicle sales by 2025, 47% by 2030, and 86% by 2040.
So far China is leading the way with EV shipments as the vehicles are more competitively priced against ICEs in its local market relative to Europe and the US. While EV sales there have been subsidized by Chinese EV producers, which are selling EVs at a loss, the Goldman Sachs Research expects this to eventually change in around the middle of the decade, when battery price declines and a scale-up in EV sales volumes lead to a significant reduction in EV costs.
“We believe the EV market in China could be the closest to a consumer-led EV adoption phase,” Bhandari says.
New battery technologies are key for the forecast of a more rapid decline in battery prices, particularly novel anode materials with silicon that replace or blend with graphite and improve energy density. Bhandari also notes there are new battery structures such as those that increase the size of each battery cell (large cylindrical batteries) that help simplify the pack manufacturing process, “leading to a meaningful savings of labour and machine time.”
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