According to Goldman Sachs Research, the prices of batteries for electric vehicles are expected to decrease to $99 per kilowatt-hour (kWh) of storage capacity by 2025. This represents a 40% decrease compared to 2022, surpassing previous expectations of a 33% decrease. The findings suggest that advancements in battery technology and declining raw material prices, particularly for lithium, nickel, and cobalt, will contribute to the significant reduction in battery costs.
Decrease in raw material prices expected to drive battery cost reduction
The expected decrease in battery prices is largely attributed to the declining prices of key raw materials such as lithium, nickel, and cobalt. These materials, which are essential for electric vehicles, are anticipated to become more affordable. Analysts predict that battery pack prices will decrease by an average of 11 percent annually from 2023 to 2030.
According to recent research by Goldman Sachs, the cost parity between electric vehicles and internal combustion engines is projected to be achieved by the mid-2020s. This means that the overall costs of owning and operating an electric vehicle could be comparable to those of a traditional gasoline-powered vehicle. This milestone is expected to be reached due to the decreasing prices of batteries and advancements in battery technology, which is making electric vehicles more affordable and appealing to consumers.
According to Goldman Sachs Research, the market for electric vehicles (EVs) is expected to achieve cost parity with combustion engine vehicles by the mid-2020s, when considering total operating costs and excluding subsidies. This projection is based on the anticipated decrease in battery costs, which could lead to more competitive prices for EVs and increased consumer acceptance. As a result, further growth is expected in the overall market for EVs and batteries.
China’s dominance in the EV market could shift as battery prices drop
China has emerged as the leader in the electric vehicle market, with their vehicles being more competitively priced compared to Europe and the USA. This is primarily due to Chinese manufacturers subsidizing their electric vehicles and selling them at a loss. However, Goldman Sachs Research predicts that this will change as battery prices decrease and the sales of electric vehicles increase. Consequently, the costs of electric vehicles will be significantly reduced.
Rising demand for affordable electric vehicles in China drives consumer-led adoption
Chinese consumers have a wider range of affordable electric vehicles to choose from, while US and European automakers have primarily focused on larger and more luxurious models. According to Goldman Sachs Research, the Chinese market is believed to be most capable of facilitating a consumer-driven adoption of electric cars.
New Battery Technologies to Drive Faster Price Reductions
Analysts from Goldman Sachs Research highlight the significance of new battery technologies in driving the faster decline in prices. With innovations in the electric vehicle battery sector expected to emerge in this decade, particular attention is given to new battery structures that increase the size of individual battery cells. This development is seen as promising as it simplifies the manufacturing process of battery packs, resulting in significant savings in labor and machine time.
The decreasing prices of batteries for electric vehicles are expected to result in more competitive prices, increased consumer acceptance, and further market growth. China, in particular, is poised to play a leading role in the introduction of electric vehicles, as their prices become more affordable. Additionally, advancements in battery technology will accelerate the decline in prices and streamline the production of electric vehicles. These developments bode well for the future of electromobility, showing promising potential.