The price of traction batteries will fall below $100 per 1 kWh by 2025 – more than expected

The events of the spring of 2022 initially caused the prices of materials for the production of traction batteries for electric vehicles to rise, but in early 2023 Elon Musk began to aggressively reduce the prices of Tesla products, regaining a series of price increases from the previous year. Analysts at Goldman Sachs generally expect the cost of storing 1 kWh of electricity in traction batteries to fall by 40% by 2025, rather than 33% compared to 2022.

Image source: NIO

In absolute numbers this would mean as explained ElectricsThat by the middle of the decade, the cost of storing 1 kWh of electricity in traction batteries will drop to $99, and this milestone is considered a turning point for the massive expansion of electric vehicles in the market. In modern conditions, the cost of the traction battery accounts for up to 40% of the price of an electric vehicle, and an active reduction in this indicator can contribute to the growing popularity of this type of vehicle.

Up to half of the traction battery cost reduction achieved by 2025 will be achieved through price reductions for key components such as lithium, nickel and cobalt, according to analysts at Goldman Sachs. Overall, the cost of traction batteries will fall by an average of 11% per year from 2023 to 2030. By the end of the decade, the cost of storing 1 kWh of electricity in traction batteries will fall below $80.

Image source: Goldman Sachs

At some point from 2025, the share of material costs for the production of cathodes in this cost structure will stabilize at the same level as the costs of materials for the production of anodes. In the second half of the decade, optimization will be achieved primarily by reducing the cost of packing the cells into the battery; Manufacturers will also reduce operating costs and sacrifice profit margins. The majority of the savings achieved in the period 2022 to 2025 will be achieved by reducing the material costs for the production of cathodes. In their analysis, Goldman Sachs looks at costs at the level of the entire traction battery and not at the level of individual battery cells.