China’s dramatic reduction in battery prices is poised to accelerate worldwide efforts towards mass-level decarbonisation in road transport, analysts report.
According to a recent Bloomberg analysis, the cost of LFP battery cells in China has plunged by 51% to an average of $53/kWh since 2023, significantly lower than the global average of $95/kWh over the same period. Bloomberg attributes this sharp decline to declining raw-material prices, overcapacity in production, and shrinking profit margins among suppliers.
In the past eighteen months, raw material prices, particularly for cathode materials, have experienced a significant downturn. The share of cathode costs in battery cell expenses has dropped from 50% in early 2023 to less than 30% by 2024.
China’s battery manufacturing facilities operated at only 43% capacity in 2023, down from 51% in 2022, and further reductions are expected this year. As average prices approach estimated manufacturing costs, profit margins are under pressure.
Despite these challenges, advancements in battery technology and manufacturing processes continue to drive down costs. BloombergNEF (BNEF) forecasts that battery prices will remain low for several more years, potentially revolutionising both automotive and energy sectors worldwide.
Industry experts anticipate significant benefits from falling battery prices. Lower costs could make electric vehicles as affordable as traditional combustion engine models, with LFP battery packs in China now priced at $75/kWh. This reduction in costs is expected to enhance the global competitiveness of electric vehicles.
The Battery Energy Storage System (BESS) industry is also poised to benefit, with turnkey installations now costing 43% less than in 2023. BNEF projects a 61% increase in stationary storage installations worldwide this year, totalling 155 GWh.
The decline in battery prices not only benefits consumers but also accelerates global efforts towards sustainable transportation and energy solutions. China’s role in driving down battery costs underscores its influence on the future of electric mobility and renewable energy integration worldwide.