Electric vehicles (EVs) have become more affordable lately, and a big reason is the falling prices of their batteries. Market research firm TrendForce announced that in August, there was a notable 10% decrease in battery costs for both EVs and energy storage. According to the same source, we can anticipate even more reductions throughout the year.
Earlier in the year, Tesla initiated a price competition, aiming to boost the demand for its vehicles. The pandemic played a unique role in the battery industry: while initially, the demand surged leading to record prices for battery materials, the recent drop in demand for EVs has reversed that trend. TrendForce highlighted this with the statement, “highlighting an uninspiring growth pattern in the EV battery market.”
Another key point is the change in prices for lithium iron phosphate (LFP) cells. Originally developed in the U.S, LFP batteries, popularly used for affordable EVs and energy storage, have witnessed a price drop. Interestingly, while the U.S initiated its development, China now leads its global production.
The need for batteries isn’t limited to just vehicles. Consumer electronics, including laptops and smartphones, require them too. Unfortunately, with the pandemic-induced highs tapering off, there’s been a drop in demand for these gadgets. This resulted in battery suppliers attempting to clear their existing stock, a fact noted by TrendForce.
However, there’s a challenging side to this price drop story. If EV production keeps exceeding its demand, car manufacturers might face a tough choice: reduce their profit margins and prices or slow down their production, affecting the battery market further.
While falling battery prices reportedly seem like good news for consumers, it might pose challenges for manufacturers. As per TrendForce, a price war, especially in China’s storage cell production, seems inevitable. But one thing’s for sure: this will shape the future of EVs and our relationship with technology.
Graphics courtesy of TrendForce.