Electric vehicles reach tipping point with declining battery costs

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【Summary】The cost of batteries for electric cars has dropped by nearly 10% in August, reaching a key milestone that could accelerate the transition to electric vehicles. The price of lithium-ion battery cells fell below $100/kWh, a 33% drop from March 2022. This price point is seen as necessary for electric vehicles to achieve price parity with fossil fuel-burning vehicles.

FutureCar Staff Sep 20, 2023 4:22 PM PT

Electric vehicles reach tipping point with declining battery costs

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In a significant development for the electric vehicle industry, the cost of batteries dropped by nearly 10 percent in August. This decline has surpassed a crucial milestone that energy analysts consider a "tipping point" to accelerate the transition to electric vehicles. The price of lithium-ion battery cells, which power various devices from smartphones to the International Space Station, fell below $100/kilowatthour (kWh) last month. This represents a 33 percent decrease from March 2022 and an 8.7 percent drop from the previous month.

According to energy analytics firm Benchmark Mineral Intelligence, battery pack prices need to reach $100/kWh for electric vehicles to achieve price parity with fossil fuel-burning vehicles. Evan Hartley, an analyst at Benchmark, explained that the declining cell prices could enable manufacturers to sell mass-market electric vehicles at comparable prices to internal combustion engine vehicles, thereby improving the attractiveness of the EV transition for consumers and automakers. However, Hartley also highlighted concerns for companies investing in cell production outside of China, especially given the profitability challenges faced by factories in regions like Europe.

The report from Benchmark Mineral Intelligence also pointed out that the drop in battery prices could have implications for other technologies, such as solar and wind installations. These technologies often require energy storage during periods of excess production. Gerard Reid, an energy analyst, emphasized the ongoing energy and transport revolution, noting that lithium battery cell prices have now fallen below $100 per kWh, marking an 80 percent decrease over the past decade. Reid predicts that costs will continue to decrease while performance improves, suggesting that the demise of the internal combustion engine is imminent.

The decrease in battery prices can be attributed to the declining costs of raw materials, particularly lithium. Since the beginning of 2023, lithium prices have more than halved. Furthermore, recent discoveries of massive lithium deposits, such as those within the McDermitt caldera on the Nevada-Oregon border, could contribute to further price reductions. Geologists estimate that the McDermitt caldera alone may contain up to 120 million tonnes of lithium, potentially meeting global battery demand for decades to come.