Today's KNOWLEDGE Share Electric vehicle battery

Today's KNOWLEDGE Share

Electric vehicle battery prices are falling faster than expected

It wasn’t long ago rising demand and component shortages sparked concern that “greenflation” would drive up prices for the batteries used in electric vehicles. That’s subsiding as prices cool for battery metals, which could help make EVs more competitive with traditional cars more quickly. 

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 previous forecast was for a 33% decline). Our analysts estimate that almost half of the decline will come from declining prices of EV 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.

As battery prices fall, Goldman Sachs Research estimates the EV market could achieve cost parity, without subsidies, with internal combustion engine (ICE) vehicles around the middle of this decade on a total-cost-of-ownership basis. 

“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.

The EV market was initially driven by regulatory support around the world, but global EV penetration is starting to retreat from recent highs, a potential driver of which could be governments in Europe and China cutting back on subsidies.

So far China is leading the way — its EVs 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. And whereas Chinese consumers are seeing more options of competitively priced EVs, carmakers in the US and Europe have so far focused on larger and more luxurious EV models.  

Source:goldmansachs

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