Electric vehicle battery prices could drop by almost 50% by 2026

The electric vehicle (EV) sector is experiencing significant advances, and one of the most promising is the reduction in the cost of batteries, which are the most expensive component of these vehicles. According to a study by Goldman Sachs Research, the global average price of batteries is expected to decrease dramatically in the coming years, which will accelerate the mass adoption of EVs.

Falling prices: what is driving this trend?

1. Technological innovations:
   Improvements in battery design are achieving increases in energy density of up to 30%, which means they can store more energy in a smaller space. Technologies such as cell-to-pack design, which eliminates intermediate modules and optimizes space, are reducing costs and improving performance.
2. Falling prices of green metals:
   Metals such as lithium and cobalt, which account for almost 60% of the cost of batteries, have experienced a significant drop in prices following the peak between 2020 and 2023. This decline has been key to making batteries cheaper, contributing to more than 40% of the projected cost reduction.

Price projection

In 2022, the global average battery price was $153 per kWh, dropping to $149 in 2023. By the end of 2024, this cost is expected to reach $111 per kWh, with a projected decline to $80 per kWh in 2026. This level will allow electric vehicles to reach parity in total cost of ownership with internal combustion vehicles, even without subsidies.

Dominant battery types

Currently, the market is led by two types of lithium batteries:

• Nickel-based batteries: They represent 60% of the market due to their high energy density.
• LFP (lithium iron phosphate) batteries: They capture between 35% and 40% of the market, standing out for their durability, lower cost and less dependence on expensive materials such as cobalt.

Although emerging technologies such as solid-state batteries promise to revolutionize the industry with higher energy density and increased safety, their mass adoption is still years away due to challenges in large-scale production.

Impact on battery manufacturers

The battery industry has significant barriers to entry. Established manufacturers, which control 80% of the market, have stepped up their investment in research and development, making it difficult for new companies to compete. For new entrants, reaching the necessary scale of production and achieving cost efficiencies can take more than a decade.

What does this mean for consumers?

Falling battery prices will have a direct impact on the final price of EVs. According to Goldman Sachs, by 2026, consumers will be able to buy an EV at the same total ownership price as a gasoline car, even considering the faster depreciation of EVs due to constant technological improvements.

This change will not only make EVs more affordable, but will also contribute to massive consumer-driven adoption, especially in markets such as the United States, where fuel costs and environmental regulations will play a key role.