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Battery Prices Down So Sharply That EVs Could Reach Gas Car Prices By 2026

Lithium-ion battery prices witnessed a rapid fall in 2024. But something might stop this cascade.

CM 12/11

Photo by: InsideEVs

Suvrat Kothari

By: Suvrat Kothari

Dec 11, 2024 at 9:13am ET

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“I don’t like electronic cars,” said a middle-aged woman sitting next to me on a recent flight out of New York. “They’re more expensive and don’t go too far,” she added before casually revealing that both her sons in Texas drive Teslas.

I just nodded. But this was one of the several dozen conversations I’ve had with strangers who shared their feelings about EVs. Educating the masses will be a massive undertaking for everyone involved in this transition. And while I didn’t engage with her, I’m hoping she’s reading InsideEVs this morning because lithium prices are falling faster than expected, as per a new report, speeding up the timeline for EVs to reach price parity with gas cars.

Welcome back to Critical Materials, your daily round-up of news and events shaping the future of road transport. We’re also discussing loyalty among EV owners and the upcoming Stellantis-CATL battery plant in Spain.

30%: Battery Prices Haven’t Tumbled Like This In Years

CATL Shenxing fast-charging LFP battery announcement

EV battery prices are inextricably linked to costs of raw materials like lithium, a key ingredient in a cell, along with nickel, cobalt, graphite, manganese and more. While several studies have previously forecast battery prices to plummet over time, a new report from research firm BloombergNEF states that prices might be falling faster than expected, accelerating the industry’s quest for EVs to cost as much as gas cars on average by 2026.

This year, especially, was huge for the battery industry, with prices dropping 20% to $115 per kilowatt-hour. Factors like lower component prices, cell overproduction and burgeoning chemistries like lithium-iron-phosphate drove the price drop this year, as per the report.

Here’s more from BloombergNEF:

The faster-than-expected decline signals that prices for electric vehicles could fall to similar levels to internal combustion engine vehicles as soon as in 2026, when average pricing is expected to fall below $100/kWh, the benchmark often referenced as the point of price parity.

“China alone is expected to produce enough battery cells to meet 92% of total global demand of 1.2 terawatt-hours for EV and stationary storage segments in 2024,” the report said. “This exerted downward pressure on battery prices. Smaller manufacturers are being challenged by their larger peers, pressured to lower cell prices and cut margins for market share.”Whether this downward trend continues over the next few years remains an open question.

Under the Inflation Reduction Act, the Advanced Manufacturing Production Tax Credit (Section 45X) has massively subsidized battery costs. But its future now hangs in the balance. It’s uncertain if President-elect Donald Trump will also repeal 45X alongside the consumer tax credit (30D) of up to $7,500.

I’m inclined to think Trump won’t dismantle the entirety of the IRA. The law’s hundreds of billions in incentives have created thousands of well-paying American jobs and made North America the fastest-growing battery manufacturing region in the world.

Curtailing this "white gold" rush would be like giving away a lucrative inheritance just to appease a few friends and donors in oil and gas. It wouldn’t just stunt the auto industry’s growth, but also give China an even greater lead despite being so close to achieving price parity with polluting gas cars.

60%: Buyers Are Loyal Towards EVs Globally

Mercedes-EQ dealership in Yokohama, Japan

Photo by: Mercedes-Benz

According to a study by the Global EV Alliance (GEVA), an auto industry non-profit, the vast majority of car buyers who go electric aren't looking back.

Of the respondents surveyed, 92% said they would repurchase fully electric models, 4% said they would opt for plug-in hybrids and about 1% said they would return to gas cars. Nearly all of them said they were satisfied being EV drivers, thanks largely to two leading factors: lower operating costs and climate concerns.

“This is a remarkably high number and the results conﬁrm that drivers love the EV experience and EVs are here to stay,” said Joel Levin, chair of GEVA and Director of Plug In America. Lower operating costs topped climate concerns as the leading reason to buy EVs, which signals that buyers have started appreciating the practicality and logic of EVs.

Even though 72% of the respondents had home charging access, they also cited public charger reliability, uptime and long charging times as the key disadvantages.

We’ve seen plenty of EV loyalty studies in the past. A recent McKinsey study said that 46% of U.S. and 29% of global EV buyers returned to gas cars. Another J.D. Power study also had similar results. A separate S&P Mobility study said that nearly 68% of Tesla buyers returned to the brand.

The GEVA survey had 23,254 respondents from 18 countries including the U.S., U.K., Germany, France, Norway, and India, leaving China out.

90%: Stellantis And CATL Will Build A Battery Plant In Spain

Stellantis CATL JV Spain

Photo by: Stellantis

Cross-Atlantic conglomerate Stellantis, which has 14 brands under its umbrella including Jeep, Ram and Dodge, has teamed up with Chinese battery maker Contemporary Amperex Technology Ltd to invest up to $4.3 billion for a lithium-ion battery plant in Zaragoza, Spain.

Stellantis is in crisis mode. Its sales are dropping and profits are shrinking due to increased competition from Chinese automakers in Europe, a challenging landscape for electrification altogether. Unions and dealer groups have also accused it of not keeping pace with the industry and recently its controversial CEO Carlos Tavares resigned ahead of schedule.

Now the automaker is turning to the world’s largest battery maker to catch up.

The 50-50 joint venture with CATL will focus on manufacturing lithium-iron-phosphate (LFP) batteries. The JV is targeting the start of production by the end of 2026 and will supply packs for affordable crossovers and SUVs with an “intermediate range.”

However, reaching its maximum capacity of 50 gigawatt-hours comes with a big asterisk. Scaling up would depend on support from the Spanish government and the European Union, Stellantis said.

What do you think?

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100%: Would You Buy An EV Again?

Ford EV Home Charging

Photo by: InsideEVs

EV loyalty surveys are all over the place. No shocker there since adoption varies so much by region. But we want to hear from you: If you’ve gone electric, are you in for life? Or would you consider switching back to gas or hybrid? Drop your thoughts in the comments. We do read them quite seriously.

Have a tip? Contact the author: suvrat.kothari@insideevs.com

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