Mass battery production in China is the main factor behind falling electric car prices.
The cost of lithium-ion batteries has recorded its biggest drop in seven years, a trend that is expected to see electric car prices approach parity with gasoline cars.
According to the (BNEF) annual battery price survey, the average price dropped 20% to $115 per kilowatt-hour (kWh) in 2024. This reduction is attributed to excess production capacity, decreasing raw material costs, and a growing preference for lithium iron phosphate (LFP) batteries. cheaper.
The study analyzed 343 data points relating to various applications, including electric vehicles, buses and commercial vehicles. The findings suggest that battery prices could drop below 100 dollars/kWh by 2026 – a key benchmark for achieving price parity with internal combustion engine vehicles. This milestone has already been achieved in China, where electric vehicles are now more affordable than their gasoline equivalents.
China is at the forefront of battery production, expected to satisfy 92% of global demand – estimated at 1.2 terawatt hours – in 2024. This domain is exerting a downward pressure on priceschallenging smaller manufacturers as larger companies reduce costs to maintain market share. However, the oversupply is unlikely to persist as electric vehicle battery production is closely linked to vehicle sales, which are slowing across the world.
BNEF predicts that battery prices will continue to fall, reaching 69 dollars/kWh in 2030. However, this trajectory is subject to geopolitical and political uncertainties. In Europe, countries such as France and Germany reduced subsidies for electric vehicles earlier than expected, leading to slower adoption and renewed pressure to reduce emissions targets and delay the phase-out of vehicles with internal combustion engine.
The United States, as tariffs proposed by President-elect Donald Trump – 60% on imports from China and 10%-20% on imports from other regions – could pose additional challenges for battery manufacturers and the adoption of electric vehicles. These tariff regimes increase complexity for suppliers and can lead to increased costs for consumers.
