Battery bargain

Prices for batteries have dropped about 45% in the last few years in China, leading to lower production costs for electric and hybrid vehicles. Several factors are driving battery prices lower. First, raw material prices have fallen sharply. Second, production overcapacity is leading manufacturers to decrease prices. Average capacity utilization of battery plants in China fell from 51% in 2022 to 43% in 2023 and is likely going lower again this year. At the same time, technology leaders and major battery producers such as CATL and BYD are investing heavily in R&D, automation and factories, resulting in further price decreases. According to calculations from BloombergNEF, current battery prices mean that electric vehicles can be priced at or below combustion cars. As of Q1 2024, 64% of EVs are priced lower than equivalent combustion engine models in China.

Source: BloombergNEF, ICC Battery, July 2024.