The Average Price of Lithium Batteries Drops to 0.4 Yuan/Wh! Has the Rapid Price Decline Cycle Ended?

Recently, a new report released by Goldman Sachs revealed that at the battery pack level, the global average battery price decreased from $153/kWh in 2022 to $149/kWh in 2023.

Goldman Sachs predicts that by the end of this year, the global average battery price is expected to drop to $111/kWh and further decline to $80/kWh by 2026. This means that by 2026, the global average battery price will have decreased by nearly 50% compared to 2023, enabling EVs in the US to achieve cost parity with internal combustion engine vehicles without subsidies. By 2030, battery prices may further decline to $64/kWh.

A recent report by BloombergNEF also mentioned that the prices of LFP battery cells in China were $105/kWh, $121/kWh, and $54/kWh in 2022, 2023, and 2024, respectively.

It is well known that changes in supply and demand are one of the core factors influencing price fluctuations, and the decline in battery prices is mainly attributed to the supply and demand dynamics in the upstream and downstream markets.

1. Downward Trend in Upstream Material Prices.

According to data from the China Nonferrous Metals Industry Association, in the first three quarters of this year, the average price of battery-grade lithium carbonate in the domestic spot market was 96,000 yuan/mt, down 68.2% YoY; the average price of nickel in the domestic spot market was 135,000 yuan/mt, down 25.0% YoY; and the average price of cobalt in the domestic spot market was 212,000 yuan/mt, down 25.3% YoY.

The latest market data shows that the price of battery-grade lithium carbonate in the domestic spot market has fallen below 80,000 yuan/mt, with an average price of approximately 76,000 yuan/mt on December 13, already touching the cost line of some lithium chemical producers. Meanwhile, the price decline space for midstream materials, including cathode active materials and electrolytes, has become very limited.

Earlier analysis and calculations by Soochow Securities indicated that based on a lithium carbonate price of 80,000 yuan, the cost of leading LFP battery cell producers is estimated at approximately 0.32 yuan/Wh (excluding tax), while the cost of leading NCM523 battery cell producers is estimated at approximately 0.45 yuan/Wh (excluding tax). For second-tier producers, the costs of LFP and NCM battery cells are approximately 0.37 yuan/Wh and 0.50 yuan/Wh, respectively.

2. Downward Cost Pressure Transmission.

On December 8, Cui Dongshu, Secretary General of the China Passenger Car Association, stated in an article that the price war in the national passenger car market will remain intense in 2024. The peak of new energy vehicle promotions has risen by 7 percentage points and has solidified into price reductions. From January to November 2024, the scale of price reductions reached 195 car models, surpassing the full-year scale of 150 models in 2023 and significantly exceeding the total scale of 95 models in 2022.

Among them, from January to November 2024, the price reduction for new plug-in hybrid car models reached 15,000 yuan, with a reduction rate of 8.5%; the price reduction for new pure EV models reached 20,000 yuan, with a reduction rate of 10%; the price reduction for new range-extended hybrid models reached 15,800 yuan, with a reduction rate of 6.1%; the price reduction for new hybrid models reached 10,500 yuan, with a reduction rate of 4.3%; and the average price reduction for new conventional fuel models and discounted models was 13,400 yuan, with an average reduction rate of 7.3%.

In the energy storage sector, public data shows that the price of LFP energy storage battery cells has dropped from 0.9 yuan/Wh–1.0 yuan/Wh at the beginning of 2023 to the current 0.3 yuan/Wh–0.4 yuan/Wh. The average unit price of energy storage systems has decreased from approximately 1.5 yuan/Wh to the current 0.5 yuan/Wh–0.6 yuan/Wh, with some energy storage system bid prices already below 0.5 yuan/Wh.

Q1 is traditionally the off-season for lithium battery production schedules. Industry forecasts suggest that battery prices may continue to decline at the beginning of next year.

However, the price reductions for some new car models have already exceeded the rate of manufacturing cost declines. Xiao Zhengsan, President of the China Automobile Dealers Association, previously mentioned that the automotive market is exhibiting a paradox of increased volume without increased revenue and increased revenue without increased profit. Price reductions as a means to stimulate car sales are gradually losing effectiveness, with their negative effects far exceeding expectations.

BloombergNEF also pointed out that the decline in lithium battery manufacturing costs has not kept pace with the decline in battery cell prices, and the gap between the two has been narrowing, indicating that the profit margins of domestic lithium-ion battery cells in China continue to shrink.

Meanwhile, the price decline space for upstream lithium chemicals, cobalt salts, and midstream materials such as cathode active materials and electrolytes has become very limited, with some materials already hitting the bottom.

In early September this year, Meng Xiangfeng, Vice President of CATL, mentioned when discussing changes in lithium battery costs that the rapid decline cycle of lithium battery costs should be over. In the future, in the absence of significant fluctuations in raw material and mine costs, there is still room for cost reductions through technological advancements, process improvements, and industry chain integration. As costs decrease, application scenarios will further expand.

"The rapid decline cycle of lithium battery prices has indeed ended because the industry has entered a mature stage," Wu Hui, General Manager of the Research Department at EVTank and Director of the China Battery Industry Research Institute, told Battery China on December 12. "From 2011 to 2020, lithium battery prices dropped by nearly 85%, from 3,800 yuan/kWh to 578 yuan/kWh. Starting in 2021, due to the significant increase in raw material prices such as lithium carbonate, the average price of lithium batteries rose to a peak of 1.2 yuan/Wh in 2022. Since 2023, with the decline in raw material prices such as lithium carbonate, the average price of lithium batteries has fallen back to the current approximately 0.4 yuan/Wh."

Regarding the future trend of battery prices, Wu Hui predicts that as the industry matures, it is unlikely to see the dramatic price fluctuations of the past. Overall, the trend will be a steady decline. With the improvement of automation levels, combined with economies of scale and technological advancements, lithium battery prices are expected to continue decreasing.

Yu Qingjiao, Secretary General of the Zhongguancun New-Type Battery Technology Innovation Alliance, also mentioned at the ABEC 2024 | 11th China (Guangzhou) Battery New Energy Industry International Summit Forum that in the long term, market competition will shift from price wars to value wars. The market, demand, products, technology, innovation, brands, quality, customers, and services will all move upward. Around the value war, industry chain enterprises are changing their competitive mindset, adhering to long-termism, and striving for breakthroughs.