The future of electric vehicles (EVs) is looking brighter than ever, thanks to a projected decline in battery prices. Goldman Sachs Research predicts that global average battery prices will fall to $111 per kilowatt-hour (kWh) by the end of 2024, paving the way for a consumer-led EV adoption phase. This decline is attributed to a combination of factors, including technological advancements that allow companies to increase energy density and a decrease in battery metal prices, such as lithium and cobalt, from their peak levels in the early 2020s.
While current leading battery types are lithium-based, the future holds promising advancements in solid-state batteries, which offer even higher energy density. Nikhil Bhandari, co-head of Goldman Sachs Research’s Asia-Pacific Natural Resources and Clean Energy Research, notes that lithium-based chemistries will continue to improve in the meantime. By 2026, the average battery price could drop to $80/kWh, reaching cost of ownership parity with combustion engine-powered cars in the U.S. without subsidies, according to Goldman Sachs researchers. This milestone, Bhandari believes, will mark the beginning of a consumer-led EV adoption phase.
Currently, EVs come at a premium compared to gasoline-powered vehicles. Data from Cox Automotive reveals that the average transaction price of an EV in the U.S. was $56,574 in August, while the average for a combustion engine vehicle was under $48,000. However, the EV market share in the U.S. is steadily growing, reaching 7.6% in 2023, up from 5.9% in 2022, according to Kelley Blue Book Estimates. While California boasts strong EV adoption, other states like North Dakota lag behind.
The anticipated decline in battery prices and the eventual cost parity with gasoline-powered cars could be a game-changer for the automotive industry, making EVs more accessible and attractive to a wider range of consumers. This, in turn, could accelerate the transition towards a cleaner and more sustainable transportation future.
