The cost of EV battery packs has dropped an astounding 90% in the last 15 years

[Skye Jacobs]

In brief: The electric vehicle industry has undergone a dramatic transformation in battery technology over the past 15 years, with costs plummeting as a result. These trends are predicted to continue, with estimates suggesting that by 2027, EV production costs could fall below those of gas-powered vehicles. However, the financial calculus for potential buyers is complicated by predictions of rising costs in other areas of electric vehicle ownership.

According to the Department of Energy's Vehicle Technologies Office, lithium-ion battery pack costs for EVs have plummeted by an astounding 90% from 2008 to 2023, when adjusted for inflation. In 2023, the estimated cost stood at $139 per kilowatt-hour (kWh) for large-scale production, a dramatic decrease from $1,415 per kWh in 2008.

This substantial cost reduction is having a profound impact on the overall expense of electric vehicles, with research firm Gartner anticipating that by 2027, EV production costs could potentially undercut those of gas-powered vehicles.

Several key factors have contributed to this decline. Technological advancements have led to higher-energy-density batteries, allowing EVs to store more power in a compact space. The introduction of new battery chemistries, such as Lithium Iron Phosphate (LFP), has further reduced costs, with major automakers like Tesla, Rivian, and Ford already incorporating LFP batteries into some models.

Additionally, manufacturing innovations, including centralized vehicle architecture and gigacastings, have streamlined production processes, reducing both manufacturing costs and assembly time.

Economies of scale have played a crucial role as well. As production volumes increase, the cost per unit decreases, with the DOE's estimate based on an annual production scale of at least 100,000 units. Moreover, the increasingly competitive EV market has driven manufacturers to find innovative ways to cut costs.

The declining prices of raw materials and components have also been contributing factors. BloombergNEF's annual battery price survey confirms this trend, revealing that lithium-ion battery pack costs fell by 14% in 2023, reaching a record low of $139 per kWh. The survey provides further nuance to the battery market, noting that growth in the space has fallen short of industry expectations.

This unexpected softening of demand prompted many electric vehicle and battery producers to reassess their production targets, further influencing battery prices. Additionally, the lithium market, which saw peak prices at the end of 2022, has since stabilized, with prices now on a downward trajectory.

"In the many years that we've been doing this survey, falling prices have been driven by scale learnings and technological innovation, but that dynamic has changed," said Evelina Stoikou, energy storage senior associate at BNEF and lead author of the report. "The drop in prices this year was attributed to significant growth in production capacity across the value chain in combination with weaker-than-expected demand."

Looking ahead, BloombergNEF projects further reductions to $113/kWh by 2025 and $80/kWh by 2030.

While this trend in battery costs is encouraging, it's important to consider other factors that may impact the overall cost of EV ownership. Gartner predicts a 30% increase in EV repair costs by 2027, particularly for serious accidents involving the body and battery. This could potentially lead to higher insurance premiums or difficulties in obtaining insurance for certain EV models. Indeed, perceived higher costs are a significant reason why fewer Americans want to buy an EV today compared to four years ago.

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The cost of EV battery packs has dropped an astounding 90% in the last 15 years

 

[NumberNine]

The most expensive part of owning an EV is paying for the profit margins of the companies producing them.

 

[nitebird]

The most expensive part of owning an EV is paying for the profit margins of the companies producing them.

Given that Toyota, Kia, Hyndai has a higher operating profit margin than Tesla I'm not sure how true your statement is. The companies with the highest margins are luxury brands like Porsche and Ferrari.

 

[zulu53]

Typical reduction when using bench (lab) scale production to full scale production - if one charges back to the battery all of the costs of the lab. Typically (except for drug companies) R&D costs are written of against the production company and not attributed to individual products like this. Of course a meaningless number when evaluating the cost/financing of the large capital expenditure for a full scale manufacturing facility with attendant payback period and rate-of-return criteria. Typically in the energy industry this is a 5-10% ROR and 3 year payback period. As Musk stated at the time Tesla could not get close to these and investors needed to have far more liberal financial criteria - but eventually they would "breakeven" or have a 0% rate of return. All proved to be true over the period 2008 to 2023. So its not that the DOE is lying by commission with their graph - its that they are lying by omission - relating immaterial facts to a conclusion. Tesla's got cheaper because of economy of scale in manufacturing, cost of labor in manufacturing (Chinese cheap labor in this case) and improved manufacturing techniques predictable with any new manufacturing technique. BUT - all of the low hanging fruit has been picked which is why even the DOE graph is going asymptotic - which it true. The cost of Tesla's (the lowest total ownership cost of all electric vehicles) will not be decreasing from 2023; it will be rising as the cheap labor in China disappears - not all Chinese are willing to work as slaves and the Government is smart enough to understand that.

 

[kiwigraeme]

My ebike battery is quite expensive, but probably most of that is the overall package.

With cars need a very modular system as the control unit must be very expensive

Some of the reduction must be getting the QC and specifications much more accurate
remember problems in phones due to size errors, swelling etc

 

[p51d007]

Still, the battery packs are one of the more expensive items in EV's. Also, it's the WEIGHT of the battery pack that impacts the vehicles along with the LONG charging times including waiting to charge. Then you have to factor in the range issues associated with VERY cold winters and VERY warm summers, plus the lack of charging stations & the fact the grid can't handle the load.

 

[daffy duck]

Oh so that's why EV's are so cheap, got you. Same applies to home batteries with a Tesla Powerwall not dropping 1c since launch and still around $13500.

 

[Endymio]

The most expensive part of owning an EV is paying for the profit margins of the companies producing them.

LOL, what? Of the 30+ firms producing EVs worldwide, all but one of them have negative profit margins ... they lose money on every EV they sell. In the case of a company like Ford, a zero profit margin for them would result in the vehicle price more than tripling.

The single exception is Tesla ... and even their margins over the last 4 years have varied from 1% to a maximum of 15%.