A recent analysis by BloombergNEF (BNEF) shows a drastic drop in the price of batteries in China. The price of LFP battery cells fell by 51% to an average of USD 53/kWh in 2023. At pack level, LFP battery packs have fallen from USD 151/kWh at the beginning of 2023 to USD 75/kWh in April 2024. This development makes almost two thirds of the electric cars available in China cheaper than combustion engines.
Impact on the global market and Tesla
The price drop in China has the potential to revolutionize e-mobility worldwide. While the price reductions have so far mainly been observed in China, they could also be felt internationally, as many of the cheaper electric vehicles are planned for market launch outside China in 2025 and 2026.
Tesla, as a pioneer in the electric vehicle industry, could benefit significantly from this development. Cheaper batteries mean lower production costs and make it possible to Tesla, offer more competitive prices. This could further strengthen Tesla's position in the global market and accelerate the acceptance of electric vehicles.
Reasons for the price drop
BNEF cites several factors for the price drop:
- Falling commodity prices: In the last 18 months, raw material prices in China have fallen sharply. The share of the cathode in the total cost of an LFP cell has fallen from 50% at the beginning of 2023 to less than 30% this year.
- OvercapacityChinese battery production exceeds global demand, leading to a price war. Capacity utilization of battery plants in China has fallen from 51% in 2022 to 43% in 2023.
- Subsidies and technological progressSubsidies and continuous improvements in battery technology and manufacturing processes are also contributing to the lower prices.
Outlook and implications
BloombergNEF predicts that the low prices will continue for at least the next few years. This could mean that electric vehicles will become affordable for more and more people and accelerate the transformation to sustainable mobility.
Tesla, The company that is already taking innovative approaches, such as the recently introduced range upgrade via software, is ready to take advantage of these opportunities. Cheaper batteries could further advance Tesla's mission to accelerate the transition to sustainable energy.
So this drop in battery prices in China could not only change the market landscape there, but also have a significant impact globally. Tesla Tesla and other electric vehicle manufacturers are on the cusp of a new era of electric mobility.
