Electric vehicles (EVs) may achieve price parity with internal combustion engine (ICE) cars as soon as 2026, thanks to significant declines in battery pack costs.
According to a recent survey by BloombergNEF, lithium-ion battery prices have dropped by 20% over the past year - the sharpest decline since 2017.
The study reports that the average cost of a battery pack now sits at US$115 (NZ$199) per kWh, down from US$138 (NZ$239) in 2022.
This reduction has been driven by an oversupply of battery cells, coupled with falling costs for key raw materials such as lithium and nickel. The trend brings EVs closer to the long-awaited price equivalence with petrol-powered cars.
To achieve true parity, battery prices need to reach approximately US$100 (NZ$173) per kWh. BloombergNEF suggests this milestone has already been achieved in parts of China, where some EVs are now cheaper than ICE models.
BloombergNEF predicts global average battery costs will dip below US$100 per kWh by 2026, putting EV prices on par with their petrol counterparts.
By 2030, further reductions could push prices down to as low as US$69 (NZ$119) per kWh. However, the outlook remains contingent on EV adoption rates and broader global policies supporting electric mobility.
Despite the promising trajectory, the market faces hurdles.
The oversupply of battery cells seen in 2023, driven by slowing EV sales growth in some regions, may lead manufacturers to scale back production. This could increase battery costs again, delaying price parity and reducing EV affordability, as smaller production volumes could limit economies of scale.
BloombergNEF’s findings also highlight external risks, including macroeconomic uncertainty and geopolitical tensions, which could disrupt material supply chains, increase the cost of key raw materials like lithium and nickel, and slow EV adoption rates by driving up battery prices.
While EV price parity appears within reach, it hinges on consistent global demand and supportive policies.