Cheaper electric vehicle batteries will be here to stay

Falling raw material prices and a growing menu of inexpensive battery chemistries should decrease the cost of electric vehicle batteries this year, making them cheap enough for ordinary drivers rather than just technology-enamored early adopters.

After a modest increase in 2022, lithium-ion battery prices hit an all-time low in 2023, according to an annual survey conducted by the research firm BloombergNEF. The company attributes the decline to weaker-than-expected demand for batteries and the falling price of lithium, a key raw material.

In addition, Max Reid, a battery industry analyst with the consulting firm Wood Mackenzie, says battery companies are switching to cathodes made with cheaper raw materials, such as lithium iron phosphate (LFP), which doesn’t contain expensive nickel or cobalt. LFP is becoming popular even though it stores less energy than nickel-based materials.

Battery makers are also trying to reduce the cost of high-​ capacity batteries by replacing nickel with manganese, Reid says. Others are hoping to cost-effectively improve LFP’s performance by adding manganese. “Manganese is a really cheap material that is driving down these high-performance battery prices,” he says.

Some battery makers are moving toward even-cheaper cathodes made with sodium instead of lithium. In November, the Chinese carmaker BYD announced plans for a $1.4 billion sodium-ion battery factory. The Swedish battery firm Northvolt is also hoping to commercialize sodium-ion batteries. While the raw materials for sodium-ion batteries are far cheaper than those used in their lithium counterparts, sodium-ion batteries store much less energy, Reid warns, so they have limited utility in cars. He sees more potential for stationary energy storage systems.

Evelina Stoikou, a battery analyst with BloombergNEF, says a major challenge for battery companies in 2024 will be continuing to make batteries cheaper while building new production sites in the US and Europe, where costs tend to be higher. “These two are crashing with each other,” she says.