The cost of electric vehicle (EV) batteries has plummeted by a remarkable 90% between 2008 and 2023, a new study by the US Department of Energy reveals.
This dramatic reduction, fuelled by advancements in battery technology, economies of scale and increased production, is driving down the cost of EVs and bringing them closer to price parity with their petrol-powered counterparts.
This is particularly encouraging news for New Zealand, where the government has set ambitious targets for EV adoption, aiming for 30% of the light vehicle fleet to be electric by 2035.
Battery breakthroughs
The size, weight and cost of the battery pack are pivotal factors in EV production. Thankfully, the cost has been steadily decreasing, primarily due to improvements in battery technologies and chemistries, such as the shift from nickel-metal hydride (NiMH) to lithium-ion batteries, which have led to greater energy density and longer lifespans.
In addition, the rapid growth of the EV market over the past decade has led to increased production volumes, allowing manufacturers to benefit from economies of scale and drive down costs.
Streamlining production processes and developing new manufacturing techniques have further contributed to cost reductions.
From pricey to practical
In 2008, the cost of a lithium-ion battery pack was a hefty US$1415 (around NZ$2340) per kWh. By 2023, that cost had plunged to just US$139/kWh (~NZ$230).
Even when adjusted for inflation, the price drop remains impressive. To illustrate, the 81kWh battery of a Tesla Model Y would have cost a staggering US$114,615 (~NZ$189,800) in 2008.
Today, that same battery costs just US$11,259 (~NZ$18,650). This significant reduction in battery costs is making EVs more accessible to a wider range of Kiwi car buyers, a crucial step towards mass adoption.
The future of affordable EVs
Experts predict further declines in battery costs in the coming years.
BloombergNEF's 2023 Electric Vehicle Outlook suggests that some EV models could even be cheaper than their ICE equivalents as early as 2025, even without government subsidies.
This is welcome news for New Zealand, where the Clean Car Discount scheme, which offered rebates on new EVs and fees on high-emission vehicles, ended in December 2023.
Lower production costs and manufacturer-suggested retail prices (MSRPs) translate into significant savings for EV buyers, particularly when considering the total cost of ownership. EVs tend to have lower running costs due to cheaper 'refuelling' and reduced maintenance requirements.
While the future of EV affordability looks bright, challenges remain. The current global economic climate and supply chain disruptions could impact the rate of battery cost decline.
Additionally, ensuring a sustainable and ethical supply chain for critical battery materials, such as lithium and cobalt, remains a pressing concern.
However, ongoing technological advancements, growing demand for EVs and supportive government policies suggest that the trend towards more affordable EVs is set to continue.