The price of battery packs for electric vehicles has dropped this year by the most since 2017 as oversupply from China and cheaper lithium prices have driven the decline, the annual battery price survey by BNEF showed on Tuesday.
The average price of a lithium-ion EV battery pack has declined by 20% annually to $115 per kilowatt-hour (kWh) this year, BNEF’s survey found.
A price of $100 per kWh is generally considered by industry observers as the inflection point at which electric vehicles (EVs) would reach price parity with conventional vehicles with internal combustion engines (ICE).
This price point could be reached globally as early as 2026, BNEF said in the report.
China has already reached this coveted price parity, according to the findings of the BNEF study.
However, the steep decline in battery packs masks some underlying issues and doesn’t necessarily mean that surging global demand for EVs right now is driving down battery costs and battery pack prices.
“China alone is expected to produce enough battery cells to meet 92% of total global demand of 1.2 terawatt-hours for EV and stationary storage segments in 2024,” BNEF’s report reads.
All this overcapacity in China has pressured EV battery prices down.
“Smaller manufacturers are being challenged by their larger peers, pressured to lower cell prices and cut margins for market share,” according to BNEF.
While China’s EV sales are booming thanks to government support, the authorities are also looking to curb the overcapacity in its lithium-ion battery industry in a bid to put quality over quantity.
New guidelines from June set out minimum energy density standards and stricter battery specifications, as well as advise that companies should refrain from the construction of new plants that “simply expand production capacity.”
The revised guidelines for the lithium-ion battery industry aim to “further strengthen standardized management and promote high-quality development of the sector,” the government said earlier this year.
Source: By Charles Kennedy from Oilprice.com