Battery prices to fall by almost 50% by 2026
The electric vehicle (EV) market is evolving rapidly thanks to a combination of technological advances, favourable policies and reductions in production costs. According to a recent report by Goldman Sachs, EV battery prices could fall by almost 50% by 2026, a milestone that will bring EVs closer to cost parity with combustion cars, even without government subsidies.
Specifically, the global average battery price has fallen from $153 per kWh in 2022 to $149 in 2023, and is expected to drop to $111 per kWh by the end of this year. By 2026, the price could fall further to $80 per kWh. This drop will not only make EVs more affordable, but could also significantly accelerate their adoption worldwide.
Why are prices falling?recios?
The reduction in battery costs is the result of three main factors: technological advances, falling material prices and economies of scale in production.
Technological advances
Innovation in design and materials is transforming lithium-ion batteries. New technologies have made it possible to increase energy density by 30% over conventional batteries. This means that more energy can be stored in a smaller space, reducing the amount of materials needed and therefore the cost.
In addition, designs that do away with traditional modules and convert cells directly into packs are gaining ground. This approach simplifies internal structures, saves space and reduces production costs, while improving efficiency.
Reduced material costs
The price of lithium and cobalt, key components of batteries, has fallen in recent years. These materials account for approximately 60% of the total cost of a battery, so any reduction in their price has a significant impact.
It is estimated that 40% of the decrease in the cost of batteries up to 2030 will come from reduced raw material prices, complemented by efforts to recycle materials and develop cheaper alternatives.
Economies of scale
The growing demand for electric vehicles has led to a massive expansion in battery production. Large manufacturers such as Tesla and CATL are building larger and more efficient facilities, reducing unit costs and benefiting from economies of scale.
Towards a more affordable and sustainable future
Falling battery prices could usher in a transport revolution. By reaching cost parity, EVs will cease to be a niche option and become a viable alternative for millions of consumers.
Moreover, this shift will have implications beyond transport. Cheaper batteries will also facilitate the storage of renewable energy, accelerating the transition to a cleaner and more sustainable energy system.
If these projections come to fruition, this will be a momentous shift towards a future where electric mobility is the norm, driving both a positive economic and environmental impact.