The lithium-ion battery industry has experienced a historic price decline in 2024, with average battery pack prices dropping 20% year-over-year to $115 per kilowatt-hour, marking the most significant annual decrease since 2017. Key factors driving this reduction include overcapacity in cell manufacturing, economies of scale, falling raw material costs, increased adoption of lithium-iron-phosphate (LFP) batteries, and a deceleration in electric vehicle (EV) sales growth. Despite global price variations, battery prices for battery electric vehicles (BEVs) fell below $100/kWh for the first time in China, where the market’s maturity and fierce competition among manufacturers have led to lower costs. However, prices remain considerably higher in the U.S. and Europe, reflecting regional differences in production costs and market development.
The industry’s rapid expansion in production capacity has led to significant overcapacity, with 3.1 terawatt-hours of manufacturing capacity now available—more than double the projected annual demand for 2024. While EV market growth has slowed, stationary energy storage has surged, particularly in China, intensifying competition among cell and system providers. Smaller battery manufacturers are under pressure to reduce prices to stay competitive, even as their profit margins are squeezed. Despite these challenges, the ongoing shift towards LFP batteries and advancements in manufacturing processes are expected to drive further cost reductions, enabling greater adoption of battery technology across various applications.
Looking ahead, battery prices are projected to continue their decline, driven by investments in research and development, technological innovation, and efficiency improvements in the supply chain. Emerging technologies such as solid-state batteries, advanced anode and cathode materials, and next-generation manufacturing techniques promise to deliver significant breakthroughs in cost and performance. However, potential geopolitical tensions, tariffs, and stagnation in raw material development could pose challenges. Nonetheless, experts remain optimistic that continued market competition and innovation will sustain the downward trend in battery prices, enabling broader access to energy storage solutions and accelerating the global energy transition.
