Lithium-ion Battery Prices Fall Again in 2023, China Leads the World in Battery Pack Manufacturing Costs

With battery prices fluctuating dramatically in 2022, a new study by BloombergNEF reveals that the cost of lithium-ion battery packs fell by 14% in 2023 to a record low of $139 per kWh. The annual battery price survey released by the organization reveals that battery prices fell again in 2023, presenting a new shift in the battery market.

According to BloombergNEF, global demand for batteries in the electric vehicle (EV) and battery energy storage system (BESS) markets is expected to reach 950 GWh in 2023, a 53% year-on-year increase. While battery demand is expected to grow significantly, major battery manufacturers are reporting lower plant starts and lower than expected demand and revenues, and as a result, some companies are reassessing their production targets, with implications for battery prices. Meanwhile, lithium prices reached a high at the end of 2022, but subsequent market concerns that lithium prices would remain high have largely subsided and prices are now falling back again.

Evelina Stoikou, energy storage analyst at BloombergNEF, said: "Battery prices have continued to closely follow raw material price movements this year. In the many years that we have been conducting this research, price declines have been driven by scale and technological innovation, but that dynamic has changed. This year's price declines have been driven by significant capacity growth across all segments of the value chain, coupled with weaker than expected demand."

The figures cover a wide range of battery application scenarios, including different types of new energy vehicles, buses and electrochemical energy storage projects. For pure EV battery packs, the capacity-weighted average price in 2023 is $128/kWh. At the cell level, the average price of pure EV cells is only $89/kWh, accounting for 78% of the average battery pack price. The increase in the cost share of battery cells is mainly due to changes in battery pack design, such as the adoption of module-less technology (CTP), which effectively reduces costs.

Regionally, China has the lowest average battery pack price at $126/kWh, while the U.S. and Europe have 11% and 20% higher battery pack prices, respectively. This reflects China's scale and technological advantages in battery manufacturing, but is also due to the relatively immature battery industries in the U.S. and Europe, which have higher production costs.

In addition, the electric vehicle industry and the electrochemical energy storage industry are increasingly favoring lithium iron phosphate (LFP) batteries. These types of battery packs and cells have the lowest global weighted average price of $130/kWh and $95/kWh, respectively. The study found that for the first time, the average price of LFP cells is below $100/kWh, and lithium iron phosphate is 32% less expensive than lithium nickel manganese cobalt oxide (NMC) cells.

Miners and metals traders surveyed expect the prices of key battery metals such as lithium, nickel and cobalt to fall further in 2024, with the average battery pack price expected to fall again next year to $133/kWh. Over the next few years, technological innovations and improvements in manufacturing processes will further drive down battery pack prices, which are expected to fall to $113/kWh in 2025 and then dramatically to $80/kWh in 2030.

Yayoi Sekine, head of energy storage research at BloombergNEF, said: "Battery prices have been on a roller coaster ride for the past two years. Large markets such as the U.S. and Europe are building up local battery manufacturing capacity, and we're watching closely to see how production incentives and tighter regulations on key minerals will affect battery prices. These localization efforts will add some complexity to battery price trends in each region over the next few years." The localization trend in the U.S. and Europe could add upward pressure on battery pack prices because of the higher cost of battery manufacturing in these regions compared to Asia.

Continued investment in R&D, improved manufacturing processes and expansion of capacity in all segments will help to enhance battery technology and reduce costs over the next decade.BloombergNEF expects next-generation technologies such as silicon and lithium metal anodes, solid-state electrolytes, new cathode materials and cell manufacturing processes to play an important role in further reducing prices. As the battery industry continues to evolve, the market will see more changes and challenges.