EV battery prices falling: report

A REPORT published earlier this month by Goldman Sachs Research suggests the price of battery packs for electric vehicles is falling at a faster than expected rate.

According to the US outlet, lower metal prices, accelerating technology and improved production methods are helping to drive down costs, meaning BEVs will become more competitive with ICE-powered cars more quickly.

The publication suggests battery prices will fall to $US99 ($A151) per kilowatt hour (kWh) of storage by 2025, a 40 per cent decrease from 2022, and a 17 per cent improvement over previous forecasts.

Goldman Sachs Research analysts estimate that almost half of the decline will come from declining raw material prices, such as those for lithium, nickel, and cobalt.

Co-head of Goldman Sachs Research Asia-Pacific natural resources and clean energy research Nikhil Bhandari suggests battery pack prices are now expected to fall by an average of 11 per cent per year between now and the end of the decade.

“The reduction in battery costs could lead to more competitive EV pricing, more extensive consumer adoption, and further growth in the total addressable markets for EVs and batteries,” he said.

Mr Bhandari suggests that as battery prices fall, BEVs could achieve cost parity – without subsidies – with internal combustion engine vehicles by as early as 2025 on a total-cost-of-ownership basis.

He said the EV market was initially driven by regulatory support around the world, but that global EV penetration is “starting to retreat from recent highs”, a potential driver of which could be governments in China and Europe beginning to cut-back on EV subsidies.

“We believe the EV market in China could be the closest to a consumer-led EV adoption phase,” he stated.

Goldman Sachs Research analysts believe the EV market transition will be more heavily influenced by consumer adoption than government largesse as battery prices drop, estimating global penetration for battery electric vehicle uptake to jump to 17 per cent in 2025, up from just two per cent in 2020, and to 35 per cent and 63 per cent by 2030 and 2040 respectively.

Further, in a “hyper adoption” scenario, those numbers could account for up to 21 per cent of the global market by 2025, 47 per cent by 2030, and 86 per cent by 2040.

Perhaps unsurprisingly, China is leading the way forward for the adoption of battery electric vehicles with models that are more competitively priced than ICE vehicles in its local market relative to Europe and the United States.

The sale of battery electric vehicles in China has been heavily subsidised by Chinese manufacturers – many of which are state-owned – with many sold at a loss.

However, this too is expected to change by the middle of the decade. Goldman Sachs Research suggests further deceases in battery costs and a scale-up in EV sales volumes will lead to a “significant reduction” in EV costs.

As is the case with any new technology, the rapid improvement in technology and production methods will further reduce costs, with several forthcoming innovations (including solid state batteries) likely to create what the report refers to as “pockets of strength” along the battery value chain.

These further include novel anode materials featuring silicone that replace of blend graphite and improve energy density.

New battery structures – particularly large, cylindrical types – are also expected to help simplify the battery pack manufacturing process, leading to what Mr Bhandari says are “meaningful savings of labour and time”.