The cost of making an lithium-ion battery packs for electric vehicles has for the first time fallen below the “magic number” needed to bring the price of EVs on par with that of internal combustion engine (ICE) cars, and will soon be an industry average by 2023.
New figures released by Bloomberg New Energy Finance (BloombergNEF) on Thursday (Australia time) show that for the first time, a battery pack price of $US100 per kilowatt hour ($A131/kWh) was reported in 2020.
As Bloomberg noted on Thursday, the threshold for EV upfront purchase price parity with ICE vehicles is about $US100/kWh.
On average, battery packs now cost $US137/kWh ($A180/kWh), BloombergNEF reports, and by 2023, the average price will hit $US101/kWh.
That is 89% less than the cost of a battery pack in 2010, when they cost $US1,100/kWh ($A1,444/kWh), says Bloomberg.
The lowest price reported in 2020 was for electric buses in China. Across the Chinese bus market, the average was $US105/kWh.
“It is a historic milestone to see pack prices of less than $100/kWh reported. Within just a few years we will see the average price in the industry pass this point,” said James Frith, BNEF’s head of energy storage research and lead author of the report.
The new figures will mean that EVs – which have far less maintenance costs and cost much less to run – will effectively have a much lower cost of ownership than ICE vehicles.
When this happens, upfront price parity with ICE cars will likely become an overrated catch cry, as drivers begin to embrace the much lower cost of EVs.
BloombergNEF credits the reductions in price to scale up of the industry resulting in bigger orders, as well new pack designs.
New cathode chemistries and reduced manufacturing costs have also contributed, as has the price of raw cathode materials which have dropped since a 2018 high, stabilising in 2020.
“The increasingly diversified chemistries used in the market result in a wide range of prices,” Daixin Li, a senior energy storage associate at BNEF said.
Li says that cobalt-free chemistries such as the lithium iron phosphate used in China-made Tesla Model 3s are also contributing to lower average prices.
“Battery manufacturers are racing to mass-produce higher energy-density batteries with some new chemistries such as lithium nickel manganese cobalt oxide – NMC (9.5.5) – and lithium nickel manganese cobalt aluminum oxide – NMCA – set to be mass-produced as early as 2021. Lithium iron phosphate – LFP – however plays as a cost-competitive alternative, contributing to the lowest reported cell prices of $80/kWh.”
And even if the cost of raw materials bounce back up, Frith says a return to higher pack costs will not be catastrophic for the electric mobility transition.
“What’s more, our analysis shows that even if prices for raw materials were to return to the highs seen in 2018, it would only delay average prices reaching $100/kWh by two years – rather than completely derailing the industry,” he said.
“The industry is becoming increasingly resilient to changing raw material prices, with leading battery manufacturers moving up the value chain and investing in cathode production or even mines.”
BloombergNEF notes that electric car makers are now reporting gross margins up to 20%, with high utilisation rates on factory lines which also contributes to falling costs.
While a steady decrease in battery packs in not guaranteed, BloombergNEF expects battery prices could fall to $US58/kWh ($A76/kWh) by 2030.
Achieving could be via several paths, including the adoption of solid state batteries, which are being pursued by several players such as VW’s QuantumScape or Toyota and can cost 40% less than today’s lithium-ion batteries to make.
Bridie Schmidt is lead reporter for The Driven, sister site of Renew Economy. She specialises in writing about new technology and has been writing about electric vehicles since 2018. She has a keen interest in the role that zero emissions transport has to play in sustainability. She has participated in podcasts such as Download This Show with Marc Fennell and Shirtloads of Science with Karl Kruszelnicki and is co-organiser of the Northern Rivers Electric Vehicle Forum.