Lithium-ion battery prices have experienced a significant drop in 2024, with prices falling 20% compared to the previous year, reaching a record low of $115 per kilowatt-hour (kWh) in December. This marks the largest annual decrease in battery prices since 2017, according to BloombergNEF (BNEF). The decline in prices is driven by several factors, including an oversupply of battery cells, lower metal and component costs, and a slowdown in the growth of electric vehicle (EV) sales.
Key Drivers Behind the Price Decline
The sharp drop in lithium-ion battery prices can be attributed to a combination of overcapacity in battery manufacturing, the adoption of cheaper lithium iron phosphate (LFP) batteries, and a reduction in demand for EVs in key markets. BNEF noted that cell manufacturing capacity had been expanded aggressively in anticipation of a boom in EV and stationary storage demand, but the slowdown in global EV sales growth has left manufacturers with excess capacity. This has pushed prices to their lowest point in years.
Additionally, metal prices, particularly lithium, cobalt, and manganese, have been in decline. For example, lithium carbonate prices fell dramatically in 2024, averaging between $10.56 and $11.33 per kilogram in November, down sharply from $19.91 to $21.32 per kilogram during the same period in 2023, according to Fastmarkets. This price drop in raw materials has further contributed to the overall decrease in battery pack prices.
Impacts on EV Battery Materials and Recycling Market
The fall in battery prices poses challenges for companies involved in the recycling of end-of-life lithium-ion batteries, particularly those recovering materials like black mass, precursor cathode active materials (pCAM), and various metals such as lithium, cobalt, and manganese. With the reduced demand for new battery production, the economics of recovering these materials may become less favorable.
Moreover, the shift toward cheaper LFP batteries, which do not rely on metals like cobalt and nickel, further reduces the demand for certain types of metal recycling. This shift could impact companies focused on recycling and the supply chains for critical battery materials.
Outlook for 2025 and Beyond: Continued Price Reductions Expected
BNEF anticipates that battery pack prices will continue to decline into 2025, predicting a further reduction of $3 per kWh. Over the longer term, BNEF expects next-generation battery technologies to play a crucial role in reducing prices even further. Innovations such as silicon and lithium metal anodes, solid-state electrolytes, new cathode materials, and more efficient manufacturing processes are expected to lower production costs and further drive down battery prices in the next decade. These technological advancements, alongside economies of scale and greater production efficiencies, are likely to further disrupt the battery market.
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