The cost of owning an electric vehicle has been a concern for many potential buyers when compared to gas-powered cars. However, there is good news on the horizon as the price of a crucial component in EVs, batteries, is seeing a decline. This drop in battery prices is giving hope to automakers that they will be able to narrow the cost gap between electric and gas vehicles, especially as they face decreasing demand.
According to analysts at Goldman Sachs, batteries make up a significant portion of the cost of producing an electric vehicle, ranging from one-third to one-fourth of the total cost. They predict that by 2024, the average cost of batteries for automakers globally will be around $115 per kilowatt-hour, which is a 23% decrease from the previous year. These prices are expected to fall even further by another 20% in 2025.
Elon Musk, the CEO of Tesla, has also noted the decrease in costs for lithium-ion cells used in EV batteries. He mentioned that battery cell suppliers have increased their supply, while orders from other car manufacturers have declined. This shift in demand has also impacted the price of lithium, which has dropped over 70% in the past year.
Kieran O’Regan, the co-founder of About:Energy, a battery data and software company, highlighted that raw material prices play a significant role in the overall cost of EV batteries. As battery prices continue to decrease due to technological advancements, the impact of raw material costs becomes more pronounced.
While batteries are a crucial component, there are other factors contributing to the cost of EVs, such as research, development, assembly, and manufacturing. However, the industry is making strides in reducing the price of electric vehicles, with Alan Taub from the University of Michigan noting that technology advancements are driving down costs significantly.
In the US, automakers have scaled back their electric vehicle rollout plans due to declining demand. The price of EVs, along with factors like range anxiety and consumer preference for hybrids, has led to tepid enthusiasm among buyers. Despite efforts to make EVs more affordable through financing deals and incentives, the cost of owning an electric vehicle in the US remains higher than that of a gas-powered car.
One reason for this price difference is the preference of US drivers for larger vehicles that require bigger, more expensive batteries. Additionally, there is a time lag between when battery costs decrease and when those savings are reflected in the pricing of new vehicles.
However, there is optimism for the future, with analysts predicting a breakeven point between EVs and internal combustion engine cars in the US by 2025 or 2026. This projection is based on further reductions in battery prices expected next year. The cost of ownership for electric vehicles, which includes fuel or charging, repairs, and maintenance, will play a crucial role in making EVs more competitive in the market.
Overall, the decline in battery prices and the advancements in technology are paving the way for more affordable electric vehicles in the near future. As the industry continues to evolve and adapt, there is hope that owning an electric vehicle will become more accessible and cost-effective for consumers.