Lithium-ion battery pack prices fall to record low of $139/KWh

BloombergNEF’s annual battery price survey shows that battery prices will fall 14% from 2022 to 2023.

Following an unprecedented price increase in 2022, lithium battery prices have fallen again this year. According to analysis by research firm BloombergNEF, lithium-ion battery pack prices have fallen by 14% to a historic low of $139/KWh. This is due to increased production capacity in all links of the battery value chain, falling prices for raw materials and components, and lower demand growth than some industry expectations.

Analysis shows that battery demand for electric vehicles and stationary energy storage will still grow at an impressive rate of 53%, reaching 950GWh by 2023. Despite this growth, major battery manufacturers reported lower utilization rates at their factories, while demand and revenues were lower than many companies expected. As a result, many electric vehicle and battery manufacturers have reviewed their production targets, which in turn has affected battery prices. Lithium prices reached a high point at the end of 2022, but concerns that prices will remain high have largely subsided, and prices are now falling again.

Evelina Stoikou, senior associate for energy storage at BNEF and lead author of the report, said: “This is another year in which battery prices have closely followed raw material prices. Over the years we have been doing this survey, scale learning and technological innovation have driven price declines, but this dynamic has changed. This year’s price decline is due to significant capacity growth across the value chain, combined with weaker-than-expected demand.”

These figures represent averages across a range of battery end uses, including different types of electric vehicles, buses and stationary energy storage projects. For battery electric vehicle (BEV) battery packs, the volume-weighted average price is $128/KWh in 2023. At the cell level, the average price for BEVs is just $89/KWh. This suggests that, on average, the battery accounts for 78% of the total pack price. Over the past four years, the battery-to-pack cost ratio has increased from the traditional 70:30 ratio. This is partly due to changes in battery pack design, such as the introduction of a cell-to-pack approach, which has helped to reduce costs.

In terms of regional data, China has the lowest average battery pack price at $126/KWh. Packs in the United States and Europe rose by 11% and 20%, respectively. The higher prices reflect the relative immaturity of these markets, higher production costs, lower volumes, and a diverse range of applications. Fierce price competition has also emerged in China this year, with battery manufacturers increasing production capacity in an effort to get a piece of the growing battery demand.

The industry continues to shift to lower-cost cathode materials, namely lithium iron phosphate (LFP). These battery packs and cells have the lowest global weighted average prices, at $130/kWh and $95/kWh, respectively. This is the first time that Bloomberg New Energy Finance’s analysis has found an average price of less than $100/kWh for LFP batteries. By 2023, LFP batteries will be 32% cheaper on average than lithium nickel manganese cobalt oxide (NMC) batteries.

Miners and metal traders surveyed expect prices for key battery metals such as lithium, nickel and cobalt to fall further in 2024. As a result, BNEF predicts that the average price of battery packs will fall again next year to $133 per KWh. In the coming years, technological innovation and advances in manufacturing technology will drive battery pack prices down further, to $113/KWh in 2025 and $80/KWh in 2030 .

Yayoi Sekine, head of energy storage at Bloomberg New Energy Finance (BNEF), said: “Battery prices have been on a roller coaster ride over the past two years. Large markets such as the United States and Europe are building up local battery manufacturing, and we are closely watching how production incentives and strict regulation of critical minerals will affect battery prices. These localization efforts will further complicate regional differences in battery prices in the coming years.”

The localization of battery manufacturing in regions such as the United States and Europe could put upward pressure on battery pack prices as local industries scale up. Battery manufacturing costs are higher in the United States and Europe compared to Asia, where most batteries are currently produced, due to higher energy, equipment, land and labor costs. Local policies, such as the US$45 per KWh production tax credit for cells and battery packs under the US Inflation Reduction Act, could offset some of these costs, although the impact of the IRA on pricing is unclear.

Over the next decade, continued investment in research and development, improved manufacturing processes and expanded supply chain capacity will help improve battery technology and reduce costs. Bloomberg expects that next-generation technologies such as silicon and lithium metal anodes, solid-state electrolytes, new cathode materials and new battery manufacturing processes will play an important role in further reducing prices.

(Source: Bloomberg New Energy Finance Global Lithium Battery Network, New Energy Network Comprehensive)