Falling battery prices have been one of the most consistent trends in the electric vehicle industry for the last decade. Prices dropped from well over $1,000 (all figures in USD) per kilowatt hour in 2010 to $141 per kWh last year.
This jump-started one of the biggest shifts in the auto industry in the last century, spurring automakers to plow billions of dollars into EVs.
The trend has ground to a halt this year, with BloombergNEF’s annual lithium ion battery price survey showing a seven per cent increase in average pack prices in 2022 in real terms. This is the first increase in the history of the survey.
There are several factors driving the uptick, but the single most important one is rising costs for materials including cobalt, nickel and lithium.
While prices for nickel and cobalt have come down in recent months, and lithium may be about to turn, each of these are still higher than they have been in previous years. This is driven by surging battery demand and a lag in how fast new supplies can be brought online.
The average battery price would have been even higher if not for the shift to lower-cost lithium iron phosphate (LFP) batteries, which contain no nickel or cobalt.
LFP batteries have gained significant market share in the last three years, with BloombergNEF expecting them to account for around 40 per cent of global EV sales this year.
Battery manufacturer margins also are lower this year, suggesting they have absorbed some of the rising costs of materials and components.