A November 2023 report from BloombergNEF (BNEF) found that, while lithium-ion battery prices rose significantly in 2022, they have been falling on a continuing basis in 2023.

In specific, the price of lithium-ion battery packs has dropped 14 percent this year, driven by raw material and component prices falling as production capacity increased across all parts of the battery value chain, while demand growth fell short of some industry expectations.

The analysis indicates that battery demand across electric vehicles and stationary energy storage is still on track to grow at a remarkable pace of 53 percent year-on-year, reaching 950 gigawatt-hours in 2023. “Despite this growth, major battery manufacturers reported lower utilization rates for their plants, while demand and revenue fell short of many companies’ expectations,” says the report. “As a result, many EV and battery makers revisited their production targets, which in turn impacted battery prices.”

Evelina Stoikou, energy storage senior associate at BNEF and lead author of the report, noted, “It is another year where battery prices closely followed raw material prices. In the many years that we’ve been doing this survey, falling prices have been driven by scale learnings and technological innovation, but that dynamic has changed. The drop in prices this year was attributed to significant growth in production capacity across the value chain in combination with weaker-than-expected demand.”

Miners and metals traders who were surveyed for the report noted that they expect prices for key battery metals like lithium, nickel, and cobalt to ease further in 2024. Given this, BNEF expects average battery pack prices to drop again next year, reaching $133/kWh (in real 2023 dollars).

Technological innovation and manufacturing improvement should drive further declines in battery pack prices in the coming years, to $113/kWh in 2025 and $80/kWh in 2030.

Yayoi Sekine, head of energy storage at BNEF, said, “Battery prices have been on a rollercoaster over the past two years. Large markets like the U.S. and Europe are building up their local cell manufacturing, and we’re keenly watching how production incentives and tightening regulations on critical minerals will impact battery prices. These localization efforts will add a layer of complexity to how battery prices shape up regionally in coming years.”

Continued investment in R&D, manufacturing process improvements, and capacity expansion across the supply chain will help improve battery technology and reduce costs over the next decade. BloombergNEF expects next-generation technologies, such as silicon and lithium metal anodes, solid-state electrolytes, new cathode material, and new cell manufacturing processes to play an important role in enabling further price reductions.