Will we see EV battery prices also completely implode globally now?
The landscape of electric vehicle (EV) affordability is rapidly shifting, driven by a dramatic 51 percent plunge in battery cell prices over the past year. This precipitous drop, reported by analysts at Bloomberg, is attributed to factors including overcapacity in production and aggressive price cuts by manufacturers striving to maintain market share amidst slower-than-expected global EV adoption.
In China, where these reductions are already evident, EVs equipped with advanced powertrains now frequently match or undercut their internal combustion engine (ICE) counterparts across various vehicle segments.
Moreover, Bloomberg notes that nearly two-thirds of EV models available in China are now cheaper than their traditional ICE equivalents. Looking ahead, similar trends are anticipated to reach markets outside China by 2025 and 2026, with numerous affordable electric models slated for launch.
The global dynamics of battery production further underscore these trends. Despite an estimated demand of approximately 950 gigawatt hours of lithium-ion batteries in 2023, global production capacity, predominantly concentrated in China, already exceeds double that figure.
This surplus is also expected to persist and even deepen as Western efforts to ramp up domestic battery manufacturing to match China’s capabilities may exacerbate existing overcapacity issues. For consumers, this translates into tangible benefits. Bloomberg anticipates that the ongoing trend of lower battery prices will continue to drive down the cost of EVs slated for production in the coming years.
On top of that, this outlook is reinforced by sustained investments in research and development, automation of production processes, and the establishment of new manufacturing facilities by Chinese and global players alike. Despite conventional economic expectations that lower prices would stimulate demand and subsequently drive up battery prices, Bloomberg’s analysis suggests a more complex scenario.
Continued advancements in technology and production efficiency, coupled with aggressive market competition, are likely to sustain these lower prices for the foreseeable future. As a result, Bloomberg predicts that the era of affordable EVs is here to stay, with “low prices expected to persist for at least the next several years.”
In summary, the convergence of declining battery costs, expanding production capacities, and ongoing technological advancements is reshaping the EV market at an accelerated pace. With EVs increasingly competitive in pricing compared to ICE models, the prospect of achieving price parity across global markets appears imminent, fostering a promising outlook for widespread EV adoption and the transition towards sustainable mobility solutions worldwide.
