Electric car batteries have become more expensive this year due to rising material costs and inflation, confounding a decade of steadily declining prices.
This is according to leading research company BloombergNEF (BNEF) in its annual battery price survey, which found the price of lithium-ion battery packs to increase 7.0 percent since 2021.
It was the first rise in battery prices since it began tracking the market in 2010, said BNEF, which found the volume-weighted average price for li-ion packs across all sectors rose to $151 per kWh of capacity ($A226).
Driving the price hike are rising prices for raw materials and battery components, and continued economic inflation – outpacing the savings gained from growing economies of scale.
“The upward cost pressure on batteries is outpacing the higher use of low-cost chemicals such as lithium iron phosphate (LFP). BloombergNEF expects prices to remain at the same level next year, further bucking historical trends,” the research firm added.
Since the battery is the most expensive component in an EV, increasing the cost of the pack will be a barrier to electric cars becoming more affordable.
Keep in mind that the figures above represent averages across various battery end-uses, including various types of electric vehicles, buses and stationary storage projects.
For battery electric vehicle (BEV) packs in particular, the price is $138/kWh ($A207) on a volume-weighted average basis in 2022. At the cell level the average BEV price is $115/kWh ($A172), meaning that on average cells account for 83 percent of total pack price.
Over the past three years, BNEF said, “the ratio of cell to pack costs has deviated from the traditional 70:30 split”. It found this was partly due to changes to pack design, such as the introduction of a cell-to-pack approach, which had helped reduce costs.
Battery pack prices are cheapest in China at $127/kWh ($A190) – explained in part by sheer scale, as China is far and away the world’s largest market for EVs.
Packs in the US and Europe are 24 percent and 33 percent more expensive, respectively.
BNEF thinks prices could rise further in 2022 “if it weren’t for the higher use of low-cost cathode chemistry known as LFP, and the continued reduction of expensive cobalt in nickel-based cathodes”.
On average, LFP cells like those used in the Tesla Model 3 and Y, MG ZS EV and BYD Atto 3, will be 20 percent cheaper than lithium nickel manganese cobalt oxide (NMC) cells by 2022 – even though the price of an LFP pack will actually increase by 27 percent throughout the year.
“Rising raw material and component prices have been the biggest contributors to the higher cell prices observed in 2022,” said BNEF energy storage associate and lead author of the report, Evelina Stoikou.
“Amid these rising prices for battery metals, major battery producers and automakers have turned to more aggressive strategies to hedge against volatility, including direct investment in mining and refining projects.”
While prices for key battery metals such as lithium, nickel and cobalt have moderated slightly in recent months, BNEF expects average battery pack prices to remain elevated in 2023 at $152/kWh ($A228) in 2022 real dollars.
However BNEF also said it expects battery prices to start falling again in 2024, when lithium prices are expected to decrease “as more extraction and refining capacity comes online”.
BNEF’s 2022 Battery Price Survey predicts that average pack prices will fall below the magic threshold of $100/kWh ($A150) by 2026 – although two years later than expected.
“Demand will reach 603GWh in 2022, which is almost double what it was in 2021. Increasing supply at that growth rate is a real challenge for the industry, but investment in the sector is also increasing rapidly and technological innovation is not slowing down,” added the energy storage chief BNEF Yayoi Sekine.