Material prices underpin Li-ion battery costs
NMC 811 cathode active material prices have fallen since 2022, broadly in line with underlying raw material costs. Source: IDTechEx
A competitive market
Supply and demand dynamics are critical to battery pricing. For example, LFP type Li-ion batteries are widely used due to their comparatively low cost compared to NMC-based battery chemistries but in 2022, LFP cathode prices increased faster than expected based on underlying lithium and material prices due to a surge in demand, especially in China. This, in turn, led to a fast rise in LFP cathode production capacity in China and overcapacity through 2023 and 2024. Subsequently, LFP cathode prices have fallen to as low as US$5/kg, squeezing margins for producers and highlighting the strong competition in LFP production in a trend seen more broadly across the industry.
Policy and technology innovation
Despite the challenges ahead, the medium-long-term outlook for the Li-ion market remains positive, with considerable growth opportunities across the supply chain. There continues to be broad policy support for both EVs and renewable deployment, both of which rely heavily on Li-ion battery technology. Policy and regulation, including the US Inflation Reduction Act and emissions performance standards in Europe, will continue to create stable demand for EVs outside of China while increasing deployment of renewable power will continue to drive the adoption of energy and battery storage systems.
Beyond policy support, technological innovation continues to improve battery performance. Advancements from solid-state batteries, silicon anodes, optimized cell designs, and more advanced battery management systems can offer safer, more energy-dense, faster charging, and longer-lasting batteries. This will help to further improve the value proposition of battery-powered EVs and stationary energy storage systems, even if lowering costs and prices below current LFP prices is a more challenging prospect. A combination of policy and technological advancement will also play a role in creating stable demand, diversifying supply chains and material requirements, and in lowering the costs of higher energy density and performance battery designs.
Conclusion
Battery prices are increasingly driven by material prices and availability, though supply and demand dynamics remain critical to pricing. While low battery prices are beneficial to consumers, it can also curb new investment and creates a challenging environment for new entrants, an issue more keenly felt by European and North American battery industries. Nevertheless, the outlook for the global Li-ion battery market remains positive, driven by broad policy support for EVs and renewables and ongoing improvements to battery technology.
#Battery #Prices #Continue #Downward #Trend #Continue
