Unprecedented Drop In EV Battery Costs Recorded In 2023

Unprecedented Drop In EV Battery Costs Recorded In 2023

Lithium-ion EV battery packs have reached their lowest prices ever, dropping 14% to $139/kWh. This significant decrease follows recent price increases in 2022, which had brought battery prices back to 2020 levels. The rapid fluctuations in prices reflect the dynamic nature of the industry.

The cost of EV lithium-ion batteries has decreased to an average of $128 per kilowatt-hour for packs and $89 per kilowatt-hour for cells.

The rapid change in prices can be attributed to basic economic factors. There was an increase in the production of EV battery packs, but the demand for batteries was not as high as anticipated, resulting in an imbalance between supply and demand and causing prices to decrease.

This increase in production was not limited to finished battery packs, but also included the production capacity for raw materials and components throughout the entire battery value chain.

The sales of electric vehicles have increased significantly compared to previous years, but some experts had anticipated even faster growth. It is difficult to accurately predict demand and time production increases in rapidly growing industries. However, this uncertainty and the resulting price changes can sometimes accelerate change.

Global electric car stock, 2010-2022
According to the analysis, battery demand in the electric vehicle and energy storage industries is expected to grow by 53% annually, reaching 950 gigawatt-hours by 2023. However, major EV battery manufacturers are experiencing lower plant utilization rates and lower demand and revenue than anticipated.

Due to this, numerous electric vehicle and battery manufacturers had to reassess their production goals, consequently influencing battery prices. Lithium prices peaked towards the end of 2022; however, concerns about sustained high prices have diminished, and prices are currently declining once more.

Ev battery
Breakdown of available cars by powertrain and segment, 2022

On average, the cost of EV battery packs was $128/kWh in 2023. However, at the cell level, the average price was $89/kWh, indicating that cells make up 78% of the total pack price.

Over the last four years, the cell-to-pack cost ratio has risen from the traditional 70:30 split. This is partly because of pack design modifications, like the implementation of cell-to-pack methods, which have contributed to cost reduction.

Reference- Clean Technica, Electrek, IEA Report, BNEF Report