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Electric vehicle battery cost falls to $132 per kWh, but it might go up from there

The cost of electric vehicle battery packs has fallen to $132 per kWh – continuing decades of cost improvements. However, it might go up over the next year as increased material prices are catching up to incremental cost improvements.

Price per kWh is the metric used to track the price of batteries. It can be used to talk about the cost of battery packs or battery cells.

For example, if Tesla were achieving a cost per kWh of $150 for its Model S battery pack, it would mean that the battery pack costs $15,000 since it has a capacity of 100 kWh.

In the auto industry, it is generally accepted that $100 per kWh for battery packs is the price point needed for electric vehicles to be cost-competitive with gasoline-powered vehicles.

Of course, this is relative to the type of vehicles since you can make cost-competitive EVs in many segments with higher battery costs.

For example, the cost of battery packs for electric busses fell to $100 per kWh last year.

The average cost of EV batteries has fallen consistently over the last year based on BloombergNEF’s annual battery price survey.

In an updated version of the survey, BloombergNEF reported that it now averages $132 per kWh:

“Lithium-ion battery pack prices, which were above $1,200 per kilowatt-hour in 2010, have fallen 89% in real terms to $132/kWh in 2021. This is a 6% drop from $140/kWh in 2020. Continuing cost reductions bode well for the future of electric vehicles, which rely on lithium-ion technology.”

That’s down from $137 per kWh last year and therefore, another small but good incremental improvement. However, these steady cost improvements might end in 2022 due to increasing material prices.

BloombergNEF reports:

“However, higher raw material prices mean that in the near-term, average pack prices could rise to $135/kWh in 2022 in nominal terms. In the absence of other improvements that can mitigate this impact, this could mean that the point at which prices fall below $100/kWh could be pushed back by two years. This would impact EV affordability or manufacturers’ margins and could hurt the economics of energy storage projects.”

The prices of important metals to battery production have significantly increased in 2021 and it is starting to pressure battery costs.

For example, nickel has increased 24% in cost so far this year:

The increase in demand is outpacing new production coming online, which takes a lot of time to deploy since mining is a capital and time-intensive industry.

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