The cost of power batteries is expected to drop to 100 yuan by 2026

As the core component of new energy vehicles, power batteries account for about 40% of the vehicle cost. For consumers of new energy vehicles, battery life and replacement costs are the core concerns.

Recently, a latest report released by Goldman Sachs Research shows that by 2026, the cost of electric vehicle batteries will decrease by nearly 50%, and the average price is expected to drop from $149 per kilowatt hour (approximately RMB 1062) in 2023 to $80 per kilowatt hour (approximately RMB 570). This means that the previous problem of high battery maintenance costs is expected to be solved, achieving the same maintenance cost as fuel vehicles.

Cui Dongshu, Secretary General of the China Association of Automobile Manufacturers, told reporters from Huaxia Times that the decline in power battery prices is mainly influenced by three factors: on the supply side, with the expansion of battery resources and raw material production capacity, the strengthening of supply chain capabilities is conducive to the reduction of power battery costs; At the manufacturing end, battery structure innovation continuously increases its energy density, reduces or even completely eliminates battery modules, and promotes a decrease in battery costs; On the consumer side, the scale of the new energy vehicle industry is still in a rapid upward trend. The combination of industry scale effects and fierce market competition environment has led to a downward trend in the terminal prices of new energy vehicles. New energy vehicle companies have strong bargaining power over power battery manufacturers, which will also drive down the prices of power batteries.

In the long run, the price of power batteries will continue to decline faster than expected, "Cui Dongshu told reporters.

The cost of batteries will definitely continue to decrease, "said Yang Hongxin, Chairman and CEO of Honeycomb Energy Technology Co., Ltd. Currently, China's automotive industry is booming, and Europe and the United States are also re examining lower cost technology routes, paying more attention to lithium iron phosphate. Therefore, the path of cost reduction will continue. In addition, companies should pay more attention to cost reduction in manufacturing and processes, including cost reduction in battery forms. From the current trend, the price of power battery pack PACK system has dropped below 5 yuan, which may become a common phenomenon next year.

From the perspective of market share of battery raw materials, Goldman Sachs mentioned in its report that the current mainstream power batteries worldwide are lithium iron phosphate batteries and ternary lithium batteries, with market shares of about 35% -40% and 60% respectively. Data shows that from January to October this year, the installed capacity of lithium batteries in China was 406GWh, a year-on-year increase of 38%. Among them, the proportion of vehicles with battery energy density of 160Wh/kg or above reached 12%, which showed a significant decrease compared to 18% in 2023. This is mainly due to the decrease in energy density caused by the replacement of ternary lithium batteries with lithium iron phosphate batteries.

Cui Dongshu analyzed that due to the high prices of nickel and cobalt, the differentiation between ternary lithium batteries and lithium iron phosphate batteries has increased. In addition to the growth in sales of long-range products, there is still a market for ternary lithium batteries. But as the price of lithium carbonate continues to decline, it will drive an increase in the total proportion of lithium iron phosphate batteries.

In addition to the two major battery types mentioned above, the industry also has layouts for solid-state batteries and sodium batteries. However, Goldman Sachs believes that both do not yet have the conditions for large-scale production.

Will the decrease in the cost of power batteries further affect car prices? Cui Dongshu stated that the continuous decline in lithium ore prices may not necessarily affect terminal prices. The price war has already led to losses for most car companies. The cost reduction of battery raw materials is not enough to offset the previously overdrawn profits of car companies. However, the decrease in raw material prices will help car companies control costs

Since 2016, China has implemented an 8-year or 120000 kilometer warranty period for core components such as new energy vehicle batteries in accordance with regulations. The first batch of new energy vehicle batteries with an 8-year warranty this year are gradually entering the "release period".

The owner of a domestic new energy brand told a reporter from Huaxia Times that their car has just turned 8 years old and needs to replace the battery. A car with an original price of 160000 yuan needs 79000 yuan to replace the battery. If you want to sell it as a second-hand car, the battery capacity is not up to standard and it cannot be sold. I didn't have enough money to replace the new car, so I had to grit my teeth and replace the battery

Unlike gasoline powered car engines and transmissions, power battery packs are often composed of dozens or even hundreds of small cells. During the maintenance process, due to requirements such as cell consistency and battery pack sealing, it is rare to replace a single cell during maintenance. Usually, a complete package replacement is required, which adds a significant amount of cost to the car owner, "said Zhao Feng, an after-sales expert at a power battery company.

The national standard "Regulations for Safety Performance Inspection of New Energy Vehicles", which will be implemented on March 1, 2025, specifies that as the service life of the vehicle increases, if the capacity retention rate of the power battery is less than 40%, that is, when the battery capacity attenuation exceeds 60%, it may face failure to meet the annual inspection standards. However, the standard not only requires that "the battery performance degradation of the vehicle during the warranty period shall not exceed 20%, otherwise it will be replaced free of charge by the manufacturer", but also does not clearly define the responsibility for vehicles that fail the annual inspection. Currently, the owner will also bear the maintenance costs themselves.

However, industry experts and companies believe that with the continuous expansion of the scale of new energy vehicles and the reduction of raw material prices, the maintenance costs of power batteries will further decrease in the future.

Meng Xiangfeng, Vice President of CATL New Energy Technology Co., Ltd., stated at the 2024 World Power Battery Conference that the company is further reducing the cost of power batteries through technological advancements, process improvements, and industrial chain integration.

It is reported that CATL has recently launched a 173Ah VDA specification lithium iron phosphate battery cell product with 2.2C rate fast charging capability, and the price of the battery cell is controlled within 0.4 yuan per watt hour. BYD (279.980, -2.67, -0.94%) is also vigorously reducing the cost of power batteries, and is expected to achieve a battery price of 0.3 yuan per watt hour within this year, which is more than half of last year.

Taking existing vehicle model data as an example, new energy vehicle models equipped with 100 kWh of electricity are generally priced at no less than 200000 yuan. Calculated based on the battery cost accounting for 40% of the vehicle cost, it is about 80000 yuan. By comparison, the cost of the aforementioned 'low-priced battery pack' will be reduced by half.

Industry experts say that if the price of a battery pack drops to $50 per kilowatt hour (approximately RMB 362), the replacement cost of a 100 kilowatt hour battery pack will be between $4500 and $5000 (approximately RMB 32600 to 36200), while the cost of a 75 kilowatt hour battery pack will be around $3375 (approximately RMB 24400). This cost level is not much different from the replacement cost of fuel engines (29000-72400 yuan). There are even studies suggesting that by 2030, the cost of replacing battery packs may be lower than the cost of replacing fuel engines.

In addition, the Goldman Sachs report also pointed out that with the continuous development of the second-hand battery market, future car owners can offset replacement costs by selling their old batteries, further saving maintenance expenses.