Prices for lithium iron phosphate (LFP) battery cells in in China fell 51% over the last year and now sit at $54/kWh. The average global price for these cells last year was $95/kWh.
Drivers: Falling raw material prices. Cathode share of total cost of a battery cell have fallen from over 50% at the beginning of 2023 to below 30% today.
Drivers: Overcapacity. There is way more battery capacity than is currently needed, and more is coming. Utilization rates are falling and manufacturers are cutting prices to maintain market share. Margins are being compressed.
Technology and manufacturing improvements are also still playing a big role. China’s battery giants continue to invest heavily in automation and R&D and are launching new products at a frenetic pace.
Battery cells at $50/kWh means the technology to decarbonize most of road transport globally is already here. Pack prices in China for LFP batteries are now at $75/kWh.
China is the world’s largest auto market, and battery-electric vehicles are currently the cheapest drivetrain by average transaction price in the country, even after stripping out mini city cars from the dataset.
Another way to look at it: Almost two-thirds of EVs available in China are already cheaper than internal combustion engine models. Still, intense price competition going on and it’s not clear how long everyone can hold on.
The stationary energy-storage market may be the biggest beneficiary. Overcapacity isn’t going anywhere anytime soon, but BNEF expects global stationary storage installations to rise to 67GW/155 GWh this year, up 61% from last year.
Over the last four years, there was a steady drumbeat of predictions that batteries and battery metals would be in short supply indefinitely. That's not what's happened, at least not yet.
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Now you ask 'Why is China EV growth so much higher than in the US and EU?'
Its because they (Chinese) were able to bring down the price of an EV at parity or lower than ICE vehicles?
How is that possible when it is not in US and EU?
Central to the EV cost is the battery, the EV battery defines the EV, and the Chinese are able to produce EV batteries at cost advantage of 20-30% because (1) they (e.g BYD CATL) have been battery makers years in the making with a big head start and possess strong R&D capabilities on the EV battery front (2) they have secured access to cheap or affordable critical minerals like lithium via vertical integration (3) they have a large domestic market that provide a base for high volume production necessary to produce EVs cheaply
And of course, cheaper lithium prices made it possible for EV batteries to get cheaper and therefore EVs.
To compete against the Chinese, US would need access to as cheap lithium supply as the Chinese because EV battery cost make up the largest % of cost of an EV.
And we are dreaming of selling higher priced (e.g ESG) lithium to the Americans?
