Electric vehicles

Batteries, the key component of EVs, keep getting cheaper. But that rate is slowing

Battery price, a closely-watched industry metric, has plummeted over the last decade.
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Francis Scialabba

· 3 min read

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Battery prices are continuing to drop, but not as quickly as in past years.

A lithium-ion battery pack cost $132 per kilowatt-hour on average in 2021, according to research from BloombergNEF. This figure includes batteries used for stationary storage as well as all sorts of EVs.

The price this year is 6% lower than the $140/kWh average battery pack cost in 2020, but BloombergNEF had originally projected a 9% decrease in 2021.

When it comes to electrifying transportation, battery price is a closely watched metric. Batteries make up at least 30% of the total cost of an EV, and the industry is aiming to hit $100/kWh in the effort to reach price parity with internal combustion engine vehicles.

The cost of batteries has dropped precipitously over the last decade—down from $1,220/kWh in 2010—but the rate of decline is slowing. In part, that’s because the raw materials used to make batteries, particularly lithium, are getting much more expensive.

The rising price of materials like lithium, cobalt, and nickel could actually reverse the downward trend in battery prices.

BYD, the second-largest battery maker in China, announced a 20% price increase for its batteries in November, citing the limited supply of raw materials.

The price of white gold

While lithium is a relatively abundant mineral, a lack of mining and refining capacity globally means that producers are already facing a lithium shortage.

“This year was the year where supply got tight and then [lithium] has just fallen into shortage in the last few months,” Simon Moores, CEO of Benchmark Mineral Intelligence told Emerging Tech Brew.

The result has been that the price of battery-grade lithium carbonate in November 2021 was more than five times that of November 2020. Due to the terms of most supplier contracts, the impact of the high demand and low supply for lithium in the second half of this year may not be felt until early 2022.

Because of this mineral crunch, next year could be the first time battery prices rise since BloombergNEF began tracking them in 2012—analysts expect prices to be $3/kWh higher than 2021, though adjusting for inflation may see prices continue to fall in real dollars.

As production scales up and manufacturing batteries becomes less expensive, the price of raw materials makes up a bigger percentage of the total cost, Moores said.

Even iron-phosphate (LFP) batteries—which have helped keep average costs down since they are cheaper to produce than lithium-ion batteries that use more expensive materials like cobalt—will see prices increase about 15% next year due to the lithium shortage, he explained.

But while the lithium supply could slow the decline in battery prices over the next few years, the long-term outlook is still positive. Experts say that by 2030, batteries will cost about half of the $140/kWh average price in 2020.

Increasing lithium extraction and refinement, streamlining manufacturing processes, and bringing more efficient next-generation battery chemistries to market will all contribute to making batteries more affordable in the long-run.

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