EV battery prices to fall by nearly 50 pct and near ICE parity by 2026, says Goldman Sachs

Global electric vehicle (EV) battery prices could drop by almost another 50 per cent by 2026, according to Goldman Sachs Research, bringing with it the potential of price parity with internal combustion engine (ICE) cars.

Technological advances designed to increase battery energy density, combined with a drop in green metal prices, are expected to push battery prices lower than previously expected, according to a new briefing from Goldman Sachs Research.

It says global average battery prices declined from $153 (all prices in USD) per kilowatt-hour (kWh) in 2022 to $149/kWh in 2023 and are projected to fall to $111 by the end of 2024.

Goldman Sachs’ researchers further predict that average battery prices could fall as far as $80/kWh by 2026, which would equate to a drop of almost 50 per cent from 2023 levels.

It is at this point that the investment giant expects battery electric vehicles could potentially achieve cost parity with ICE vehicles in the United States on an unsubsidised basis.

To explain this expected fall in price, Nikhil Bhandari, co-head of Goldman Sachs Research’s Asia-Pacific natural resources and clean energy research, pointed to the introduction of new battery products that boast around 30 per cent higher energy density and lower cost.

“The innovation is related to the structure of the batteries,” said Bhandari. “The cells are getting bigger.

“You normally pack lots of cells into smaller modules, and then lots of modules into a big battery pack. Now they’re trying to eliminate modules and directly doing cell-to-pack. That helps you save a bit of space inside. So you’re cutting costs with more simplified structures and increasing the energy of the battery at the same time.”

Innovations such as increased energy density have come hand-in-hand with the continued downturn in battery metal prices, which – accounting for nearly 60 per cent of the total cost of batteries – will drive over 40 per cent of the decline in EV battery price declines throughout the remainder of the decade.

Further declines in price will rely heavily on new battery chemistries and formats, such as sodium ion and solid state batteries, respectively.

However, according to Bhandari, the development of solid state batteries has been slower than expected, and has now “been pushed out to the later part of this decade because of challenges in moving from lab scale to mass production.”

In the meantime, then, “lithium-based chemistries are going to get stronger and stronger”, led by the current dominant lithium-based battery chemistries, lithium NMC and LFP, which together account for the lion’s share of the market.

With the continued pressure driving EV battery prices down, Goldman Sachs asked Bhandari whether the trend would “rekindle EV demand”.

“When we looked at price parity with ICE (internal combustion engine) cars, we typically looked at the price premium a consumer will pay for an EV in terms of how long it will take to recover it through fuel cost savings,” said Bhandari.

“What we didn’t account for, historically, is another concern that the consumer has. Resale values of EVs are falling faster because consumers are thinking they can buy a cheaper EV maybe three years from now.

“We account for this in our recent enhanced total cost of ownership analysis. But given that we’re still expecting a rapid fall in battery prices, and assuming a still relatively elevated oil price environment, we believe that, in markets such as the US, the total cost of ownership parity will still arrive starting in 2026.

“Admittedly, that leaves near-term EV battery demand more dependent on regulations, especially next year. But we think we’re going to see a strong comeback in demand in 2026 purely from an economics perspective. We believe 2026 is when a consumer-led adoption phase will largely begin.”

Joshua S. Hill is a Melbourne-based journalist who has been writing about climate change, clean technology, and electric vehicles for over 15 years. He has been reporting on electric vehicles and clean technologies for Renew Economy and The Driven since 2012. His preferred mode of transport is his feet.

Why did the battery price go up in 2022 and 2023?– Supply couldn’t meet demand?– Dispute in cobalt mine in Congo?– Covid?– something else?

Based on the graph the battery price increases resulted from increases in cathode prices. Based on what I just read this resulted from large increases in the raw material prices.

Global inflation.

Price of Nickel went through the roof. https://tradingeconomics.com/commodity/nickel look at that over five years. Cobalt is the same.

I thought the late 2022 one was just a speculative bubble.

Good, that’ll take care of yet another barrier to entry

We see you with you Lithium has Lion share joke…

Only in America will it be that LATE…… along with the managed international irrelevance and reduced choice.Doesn’t seem like China remains a MOST FAVOURED TRADING NATION anymore.

This is US prediction, when you look locally. A MG4 long range is cheaper than a Corolla. When the EV depreciation settles a little more and general population wakes up. Majority of new sales will be EV.

Is that purchase cost only or including lower running costs of the MG4?

It is very impressive that MG4 is cheaper than the base Corolla, but its partly because the base Corolla is now a hybrid. It’s still cheaper to get an equivalent non-hybrid hatch eg MG5.

This article is about cost to build.

Price will naturally be higher like for like with an EV because they can charge more for something better.

I think parity has already hit. Apart from a refresh or reheat of something that already exists. There is not many new ICE cars being planned from 2025 onwards.

I don’t know, everyone seems to be bringing hybrids to the market now and over the next 6 months or so, unfortunately.

Hybrids are currently having their time in the sun. But that’s a good thing. They are predominantly replacing pure ICE.

I guess I can keep the old banger going for another year.

Given that our cowardly lion follows the yellow cake road, you’ll be able to keep it forever, or the end of humans. Whichever comes first.

Isn’t that change in consumer behaviour an intended outcome of fossil fuels funded Goldman Sachs ‘report’? To keep the gravy train providers happy for a couple more years as buyers delay their EV purchase for the next cheaper iteration?

Sticker price parity with ICE is the most important metric. TCO is not uppermost in people’s minds in most , say 80% of cases.

Once that happens, then we’ll see the typical 20% to 80% S curve fast adoption phase globally.

And this my friends is why I’ve moved part of my superannuation into a fund that invests in Battery Tech & Lithium. I started doing this when I read about battery tech advances on this website which were published earlier in the year.

The fund is: Global X – Battery Tech & Lithium ETF (ACDC.ASX)

Tracking nicely with what Tesla predicted several years ago, nice.

Mg4 is already ice parity.