Research firm says EV battery prices set to decrease more

EV battery and energy storage costs dropped 10 percent in August.
Loukia Papadopoulos
Representational image of a battery pack.jpg

Historically, the cost of electric vehicle (EV) batteries has been one of the main factors contributing to the higher upfront cost of EVs compared to traditional internal combustion engine (ICE) vehicles. However, EV battery costs have been gradually falling over the years, making the vehicles more accessible and enticing to consumers. 

Now, market research firm TrendForce released a report on Thursday showing that the price of batteries used in EVs and energy storage dropped 10 percent in August as a result of the slowing demand for the cars. The company also noted that additional price declines are anticipated throughout the rest of the year.

This is according to a report by Reuters.

Many reasons, one outcome

There could be many causes for this rather sudden and steep decline, including advancements in technology, economies of scale, and increased competition. For starters, improvements in battery chemistry and manufacturing processes have led to reduced production costs.

For example, in July of 2023, Toyota announced a breakthrough that would see a new solid-state battery technology cut the cost of EV batteries by 50 percent. “For both our liquid and our solid-state batteries, we are aiming to drastically change the situation where current batteries are too big, heavy, and expensive. In terms of potential, we will aim to halve all of these factors,” said at the time Keiji Kaita, president of the Japanese auto firm’s research and development center for carbon neutrality. 

Second, many countries have offered incentives and subsidies to encourage customers to purchase more EVs for environmental reasons. These initiatives help to decrease EV battery prices.

Third, as more companies start producing EVS, competition fires up, giving customers more options and allowing them to demand more cost-competitive prices.

TrendForce reported that demand for EVs was lower than production and that there was a decline in the cost of lithium iron phosphate (LFP) cells.

Due to weak demand outside of China, prices for batteries used in energy storage have also fallen, leading battery manufacturers to reduce production in an effort to stabilize costs, added the research firm according to Reuters.

"With a glut in China's storage cell production capacity, a price war appears unavoidable, with a continued gradual price decline expected for the rest of the year," TrendForce said.

How much do they cost?

Battery prices can vary significantly depending on several factors, including the type of battery, its capacity, and the manufacturer. Typically, EV battery prices are reported in terms of cost per kWh. 

In 2021, the cost of lithium-ion batteries, the most popular type of battery used in EVs, dropped to between $100 and $200 per kWh. This amount was significantly lower than in prior years.

Due to their promise for improved energy density and safety, solid-state batteries, which are considered the next step in battery technology, were anticipated to cost more than traditional lithium-ion batteries. However, as the technology advanced, prices also decreased.