Prices for batteries in China are plummeting, and the implications are just starting to ripple outward for the global automotive market.
Over the last year, the price for lithium iron phosphate, or LFP, battery cells in China has dropped 51% to an average of $53 per kilowatt-hour. The average global price of these batteries last year was $95/kWh.
There are several factors driving prices lower. The first is raw-material prices, which have fallen sharply over the last 18 months. The cathode is where most of the raw-material costs in a battery come from, and the cathode share of total cost for an LFP cell in China has fallen from 50% at the beginning of 2023 to less than 30% this year.
The second driver is overcapacity that’s leading manufacturers to cut prices to maintain market share. China’s battery production is already higher than global EV demand, and that overcapacity problem is set to get worse before it gets better.
Overcapacity tends to lead to competitive shakeouts that shift volume toward the most efficient plants with the newest production technology, while others fall by the wayside. Average capacity utilization of battery plants in China fell from 51% in 2022 to 43% in 2023, and will be lower again this year.
BNEF’s bottom-up battery cost model shows how close average prices are now to estimated manufacturing costs, indicating that margins for vendors are shrinking.
Raw material costs, overcapacity and margin compression from manufacturers account for the bulk of what’s going on, but there’s also still significant technology and manufacturing process improvements happening. China’s battery champions CATL and BYD continue to invest heavily in research and development, automation and additional factories, and they’re launching new products at a frenetic pace. All these factors together mean that BloombergNEF’s battery team is expecting low prices to persist for at least the next several years.
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Meanwhile, there are dark clouds over US/China trade relations that could portend some hardships.
Trump is to old, unfit and a convicted felon. He should not be and will not be a president. Just a wannabe. The real ruler maybe Elon Musk.
This similar to President Cheney’s run for 6 years. After that he let bush play as president for 2 years. In this current case it is more complicated. Musk could be sidelined by having most news outlets constantly referring to him as president musk, and trump as vice-president. But I’m not sure who would be worse for 4 years, trump or musk?
good for us if they start infighting.
We all understand that Trump will take credit for anything positive that comes of Biden’s actions, right?
Just like Republican congresscritters who voted against the IRA still took credit for it when campaigning in their red states that benefited.