Electric cars are everywhere, but they come with a hefty price tag. One major cost is the battery. To make these cars more affordable, we need cheaper batteries.
In 2024, lithium-ion battery prices dropped by 20%. That’s the biggest drop since 2017. The International Energy Agency (IEA) says this is due to low mineral prices and reduced profit margins.
The price of lithium fell almost 20% in 2024. This is similar to prices in 2015, even though demand was six times higher last year.
Battery prices are dropping
The IEA report shows that low mineral prices are driven by oversupply. This makes it tough for mining companies to compete, which increases the concentration of supply chains.
The report warns that this oversupply might last for years, but low prices could discourage investment and lead to lithium and nickel shortages by 2030.
China is leading the way
Battery prices fell in all markets, but China saw the biggest drop – almost 30% in 2024. This compares to 10-15% in Europe and the US.
China’s fast pace of cost reduction and innovation in batteries is driven by fierce competition, which has reduced profit margins for most manufacturers.
Battery chemistry matters
Lithium iron phosphate (LFP) batteries, widely used in China, are almost 30% cheaper per kilowatt-hour (kWh) than nickel, cobalt, and manganese (NMC) batteries, which are common in the US and Europe.
Although NMC batteries have higher energy density, LFP batteries have reached a performance level that’s good enough for most electric vehicle applications. This makes their lower cost a key advantage for automakers targeting mass markets.
According to the report, battery prices per kWh also depend on the intended use, with electric vehicles allowing for the lowest costs.
In 2024, battery prices per kWh for plug-in hybrid electric vehicles were more than three times higher than those for battery electric vehicles, due to their smaller size and higher power requirements.
You can read the full report here.