The cost of lithium-ion batteries, which power electric vehicles (EVs), decreased by 10% in August. This reduction in price could potentially make EVs more affordable and competitive with gas-powered cars. The average price for batteries dropped to $98.20 per kilowatt-hour, the first time it has fallen below $100 in two years, according to energy analytics firm Benchmark Mineral Intelligence.
To achieve price parity with traditional fossil-fuel vehicles, battery pack prices need to reach $100 per kilowatt-hour, as stated by Benchmark. Evan Hartley, an analyst at Benchmark, believes that lower cell prices could allow original equipment manufacturers to sell mass-market EVs at comparable prices to internal combustion engine (ICE) vehicles, improving the attractiveness of EVs for consumers and automakers alike.
The decline in lithium-ion battery prices has been significant over the past decade. In 2012, the average price was $668 per kilowatt-hour, but by March 2022, it had dropped to $146.40. The further decrease in August’s average price represents a 33% reduction. Market intelligence firm TrendForce expects this gradual price decline to continue for the rest of the year.
Several factors have contributed to the decrease in battery prices. These include government subsidies, increased competition, advancements in battery chemistry, and a decrease in the cost of raw materials used in battery production. The price of lithium, for example, has fallen by more than 50% since the beginning of 2023, while the cost of nickel and cobalt has also declined significantly.
The demand for EVs has not grown as quickly as anticipated, with US carmakers reporting a significant increase in unsold EVs compared to the previous year. Despite this, rechargeable lithium-ion batteries are utilized in various devices, including smartphones, laptops, and electric toothbrushes. The price drop in batteries could also boost interest in solar-plus-battery setups for residential solar power storage.
In addition to the decline in battery prices, geologists have recently discovered massive lithium deposits in the McDermitt caldera, located on the Nevada-Oregon border. This deposit, estimated to contain up to 40 million metric tons of extractable lithium, is the largest in the world. If confirmed, it could meet global battery demand for decades and have significant implications for lithium pricing, supply security, and geopolitics.
In summary, the 10% drop in lithium-ion battery prices in August has the potential to make EVs more affordable and competitive with gas-powered vehicles. The decrease in prices is attributed to various factors, including government subsidies, increased competition, advancements in battery chemistry, and a decline in the cost of raw materials. Furthermore, the discovery of massive lithium deposits could have long-term implications for the lithium market and global battery demand.
