Battery cell prices plummet amid supply glut in China, weak EV demand

Lower battery prices, in turn, are expected to prompt Tesla and other carmakers to further slash EV prices

Battery cell prices are falling at a fast pace

Sungsu Bae 2

2023-09-15 11:33:44 baebae@hankyung.com

Batteries

The competition among automakers to cut prices of electric vehicles is expected to intensify with battery cell prices falling at a fast pace due to a supply glut in China and weak demand for EVs.

According to Taiwan-based market research firm TrendForce, the average selling price of lithium-ion battery cells in China, the world’s largest EV market, dropped 10.4% in August from the previous month – the fastest monthly fall this year.

Specifically, EV square ternary battery cells, square lithium iron phosphate (LFP) cells and pouch ternary cells fell 10.9%, 10.1% and 10.2% to 0.65 yuan ($0.09), 0.59 yuan and 0.7 yuan per 1 Wh, respectively.

Prices of square LPF cells for energy storage systems (ESS) dropped 10.5% to 0.59 yuan per 1 Wh.

Expectations for robust August demand in the ESS market fizzled, exacerbated by weaker overseas demand, according to TrendForce. This slowdown forced battery manufacturers to raise production, causing cell prices to fall, it said.

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“With a glut in China’s storage cell production capacity, a price war appears unavoidable, with a continued gradual price decline expected for the rest of the year,” it said.

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With falling battery cell prices, which account for the highest proportion of EV manufacturing costs, EV prices are expected to fall accordingly, analysts said.

The average transaction price for Tesla models in the US fell by 19.5% year on year in August and other automakers have also implemented price cuts via increased incentive spending, industry officials said.

“A fall in battery prices will lead to further price cuts for EVs,” said an industry official.

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Market tracker Gartner expects EV prices to fall to levels similar to those of internal combustion engine cars by 2027, giving consumers more opporunity to opt for electric models.

According to market research firm SNE Research, global EV sales are forecast to grow to 78.78 million units by 2035 from 14.84 million units this year.

EV battery demand is expected to rise accordingly. From the mid-2030s, battery cell demand for EVs is expected to reach 6.2 terawatt-hours (TWh), outpacing battery makers’ production capacity of 5.9 TWh, it said.

Write to Sungsu Bae at baebae@hankyung.com

In-Soo Nam edited this article.