BATTERIESA Battery Price War Is Kicking Off That Could Soon Make Electric Cars Cheaper
The main cost of an electric vehicle (EV) is its battery. The high cost of energy-dense batteries has meant EVs have long been more expensive than their fossil fuel equivalents. But this could change faster than we thought. Economies of scale and new supplies of lithium make it possible to sell batteries more cheaply. And energy-dense, all-but-fireproof solid-state batteries will make possible EVs with a range of more than 1,200km per charge. We are, in short, at the beginning of the battery revolution.
The main cost of an electric vehicle (EV) is its battery. The high cost of energy-dense batteries has meant EVs have long been more expensive than their fossil fuel equivalents.
But this could change faster than we thought. The world’s largest maker of batteries for electric cars, China’s CATL, claims it will slash the cost of its batteries by up to 50% this year, as a price war kicks off with the second largest maker in China, BYD subsidiary FinDreams.
What’s behind this? After the electric vehicle industry experienced a huge surge in 2022, it has hit headwinds. It ramped up faster than demand, triggering efforts to cut costs.
But the promised price cuts are also a sign of progress. Researchers have made great strides in finding new battery chemistries. CATL and BYD now make EV batteries without any cobalt, an expensive, scarce metal linked to child labor and dangerous mining practices in the Democratic Republic of the Congo.
Economies of scale and new supplies of lithium make it possible to sell batteries more cheaply. And the world’s largest carmaker, Toyota, is pinning its hopes on solid-state batteries in the hope these energy-dense, all but fireproof batteries will make possible EVs with a range of more than 1,200km per charge.
How Are Battery Makers Cutting Costs?
The largest market for electric and plug-in hybrid vehicles is China. But demand for EVs here has eased off, dropping from a 96% surge in demand in 2022 to a 36% rise in 2023.
As a result, battery giant CATL has seen its profits fall for the first time in almost two years.
One of the best ways to create more demand is to make your products cheaper. That’s what’s behind the cost-cutting promises from CATL and BYD.
You might wonder how that’s possible. One of the key challenges in shifting to battery-electric cars is where to get the raw materials. The electric future rests on viable supply chains for critical minerals such as lithium, nickel, copper, cobalt and rare earth elements.
Until recently, the main EV battery chemistry has been built on four of these, lithium, nickel, manganese and cobalt. These are also known as NMC batteries.
