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Since 2021, due to the significant increase in the prices of raw materials such as lithium carbonate, the average price of lithium batteries has risen to a maximum of 1.2 yuan/Wh in 2022. Since 2023, with the decline in the prices of raw materials such as lithium carbonate, the average price of lithium batteries has dropped to approximately 0.4 yuan/Wh currently.

Recently, a latest report released by Goldman Sachs shows that at the battery pack level, in 2023, the global average battery price has dropped from $153/kWh in 2022 to $149/kWh.

Goldman Sachs predicts that by the end of this year, the global average battery price is expected to drop to $111/kWh, and will further decline to $80/kWh by 2026. That is to say, by 2026, the global average battery price will decrease by nearly 50% compared with 2023, which will help electric vehicles in the United States achieve cost parity with fuel vehicles without subsidies. In 2030, the battery price may further drop to $64/kWh.

A report recently released by BloombergNEF also mentioned that the prices of lithium iron phosphate battery cells in China in 2022, 2023, and 2024 were $105/KWh, $121/KWh, and $54/KWh, respectively.

As we all know, changes in supply and demand are one of the core factors affecting price fluctuations, and the decline in battery prices is also mainly attributed to the game between the upstream and downstream supply and demand markets.

I. Downward trend of upstream material prices.

Data from the China Nonferrous Metals Industry Association shows that in the first three quarters of this year, the average price of battery-grade lithium carbonate in the domestic spot market was 96,000 yuan/ton, a year-on-year decrease of 68.2%; the average price of nickel in the domestic spot market was 135,000 yuan/ton, a year-on-year decrease of 25.0%; the average price of cobalt in the domestic spot market was 212,000 yuan/ton, a year-on-year decrease of 25.3%.

The latest market data shows that the price of battery-grade lithium carbonate in the domestic spot market has dropped below 80,000 yuan/ton. On December 13, the average price was about 76,000 yuan/ton, which has reached the cost line of some lithium salt producers. At the same time, the price reduction space of midstream materials including cathode materials and electrolytes has been very limited.

Previously, Soochow Securities analyzed and estimated that, based on the price of lithium carbonate at 80,000 yuan, the cost of leading lithium iron phosphate cells is expected to be around 0.32 yuan/Wh (excluding tax), and the cost of leading ternary 523 cells is expected to be around 0.45 yuan/Wh (excluding tax); while the costs of lithium iron phosphate and ternary cells of second-tier manufacturers are about 0.37/Wh and 0.50/Wh, respectively.

II. Transmission of cost reduction pressure from the downstream.

On December 8, Cui Dongshu, Secretary-General of the Passenger Car Market Information Joint Committee of the China Automobile Dealers Association, published an article stating that in 2024, the price war in the national passenger car market continued to be fierce, and the peak of promotion for new energy vehicles has risen by 7 percentage points and has solidified into price reductions. From January to November 2024, the number of models with price reductions was 195, which has exceeded the scale of 150 models in the whole year of 2023 and also far exceeded the total scale of 95 models with price reductions in 2022.

Among them, from January to November 2024, the price reduction of new plug-in hybrid models reached 15,000 yuan, with a price reduction intensity of 8.5%; the price reduction of new pure electric models reached 20,000 yuan, with a new car price reduction amplitude of 10%; the price reduction intensity of new extended-range hybrid models reached 15,800 yuan, with a price reduction intensity of 6.1%; the price reduction of new hybrid models reached 10,500 yuan, with a price reduction amplitude of 4.3%; the average price reduction of new conventional fuel models and price reduction models was 13,400 yuan, with an average price reduction amplitude of 7.3%.

In the energy storage field, public data shows that the price of lithium iron phosphate energy storage cells has dropped from 0.9 yuan/Wh - 1.0 yuan/Wh at the beginning of 2023 to the current 0.3 yuan/Wh - 0.4 yuan/Wh; the average unit price of energy storage systems has dropped from about 1.5 yuan/Wh to the current 0.5 yuan - 0.6 yuan/Wh, and the winning bid prices of some energy storage systems have been lower than 0.5 yuan/Wh.

The first quarter is the traditional off-season for lithium battery production scheduling. The industry predicts that the battery price may still decline at the beginning of next year.

However, the current price reduction amplitude of some new cars has already exceeded the downward speed of manufacturing costs. Xiao Zhengshan, President of the China Automobile Dealers Association, once mentioned that the automobile market presents a strange phenomenon of increasing volume without increasing revenue and increasing revenue without increasing profit. Price reduction, as a means to stimulate automobile sales, has gradually become ineffective, and its negative effects have far exceeded expectations.

BloombergNEF also pointed out that the decline rate of lithium battery manufacturing costs has failed to keep up with the decline rate of battery cell prices, and the gap between the two has become smaller and smaller, which means that the profit margins of local lithium-ion battery cells in China continue to decline.

At the same time, the price reduction space of upstream lithium salts, cobalt salts, and midstream materials including cathode materials and electrolytes has been very limited, and some materials have reached the bottom.

In early September this year, when Meng Xiangfeng, Vice President of CATL, talked about the changes in lithium battery costs, he mentioned that the period of rapid decline in lithium battery costs should have passed. In the future, without major fluctuations in raw material costs and mining costs, through technological improvement, process improvement, and industrial chain integration, there is still room for the cost of lithium batteries to decline. With the decline in costs, the application scenarios will further expand.

"The period of rapid decline in lithium battery prices has indeed passed because the development of the industry has entered a mature stage." On December 12, Wu Hui, General Manager of the Research Department of the EVTank Research Institute and President of the China Battery Industry Research Institute, told Battery Network, "During the 10 years from 2011 to 2020, the price of lithium batteries dropped by nearly 85%, from 3,800 yuan/kWh to 578 yuan/kWh. Since 2021, due to the significant increase in the prices of raw materials such as lithium carbonate, the average price of lithium batteries has risen to a maximum of 1.2 yuan/Wh in 2022. Since 2023, with the decline in the prices of raw materials such as lithium carbonate, the average price of lithium batteries has dropped to approximately 0.4 yuan/Wh currently."

Regarding the future trend of battery prices, Wu Hui predicts that due to the gradual maturity of the industry, there will probably be no large fluctuations in prices as before. Overall, it is a trend of stable decline. With the improvement of automation levels, combined with scale effects and technological progress, the price of lithium batteries will continue to decline.

Yu Qingjiao, Secretary-General of the Zhongguancun New Battery Technology Innovation Alliance, also mentioned at the ABEC 2024 | The 11th China (Guangzhou) International Summit Forum on the Battery New Energy Industry recently that in the long run, market competition will shift from a price war to a value war. The market is moving upward, demand is moving upward, products are moving upward, technology is moving upward, innovation is moving upward, brands are moving upward, quality is moving upward, customers are moving upward, and service is moving upward... Centering around the value war, enterprises in the industrial chain are changing their competitive thinking, adhering to long-termism, and achieving upward breakthroughs.

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