Battery prices hit a cliff: CATL, BYD, Panasonic, Samsung lead as competition heats up

But the price cuts show their decision can have a ripple effect around the planet.

Yet, there's a more fundamental force at work: Wright's Law is pushing exponential growth in batteries and electric vehicles (EVs). As such, predictions made by disruption guru Tony Seba, who sees 200 million EVs by 2025 and $5,000 EVs by 2030, is now within reach. Their Western counterparts, unable to compete, are cutting investments.

What's going on? It points to a new level of East-West rivalry, or an inability to collaborate for common-good benefits, with implications for geopolitics and trade now unfolding.

Domination by innovation

Companies like CATL and BYD are relentless.

Led by its low-profile founder and CEO Wang Chuanfu, a trained chemist described by US investment legend Charlie Munger as "better than Thomas Edison", BYD has impressed Warrent Buffett enough to invest in it, and in the process making more than $5 billion.

They roll out progressively cheaper, better batteries and raw materials, which Western producers struggle to match. The US and EU have used, or threaten to use, tariffs instead.

Potentially, this could make access to the latest battery technology more expensive for their people, distorting competition.

With batteries, one winning ingredient is constant innovation, mostly driven by university research labs. One clear sign of innovation: patents.

This is where Asian battery makers, the Chinese in particular, are winning in a way that should awaken aspiring competitors from their deep slumber.

As of the Q2 2023, China had more than 14,000 patent filings related to batteries. The US was a distant second, with about 4,000; South Korea stood at about 3,200; then the European Patent Office at about 2,500; and Japan at 2,300, as per Global Data.

Unstoppable

This trend will only continue in the race to the top of the on-going energy storage revolution. The greater the innovation, the more batteries are made, sold and used, orders get ramped up driving per-unit costs down, and adoption up. There's bound to be winners and losers in this journey.

As lab work leads to greater energy density (power stored per kg), it means less battery material is needed to cover the same EV range -- and new ones go farther for the same battery weight. That’s to say nothing about stationary batteries, now increasingly used in electricity grids or microgrids.

One result of this is that EVs are now cheap to charge, especially if you have solar panels. But even without solar, electric cars are getting even cheaper, and there's compelling data to back it up.

Battery prices hit a cliff

Battery prices have been coming down significantly over the past year, by an average of about 30 per cent. Here's the more exciting part: it's likely to go down even more in the coming months.

To better understand this, one must go back to Wright’s Law.

This trend isn't just happening in China, it’s happening globally. According to US government data, electric vehicle battery pack costs have come down by a whopping 90 per cent since 2008.

That's a massive reduction in just 16 years. And prices have continued to drop even in the last month.

Lithium prices down

Lithium carbonate prices, a crucial component of EV batteries, have been falling.

From a high of 600,000 RMB ($83,810) per tonne in 2022, they have now dropped below 95,000 RMB ($13,270) – a six-fold price reduction – and the lowest in years.

In China, reports show that battery sale prices have fallen by an additional 10 per cent. The decline in material costs is mainly due to the continued decrease in cathode material prices and falling prices for battery metals like cobalt, nickel, and copper.

Copper prices, in particular, have fallen sharply.

At the cell level, battery prices have also seen significant reductions. The average price of square prismatic cells (the kind used in most non-lithium phosphate EVs) dropped to 6.7 cents per Watt-hour (Wh) in July 2024, a 2.1 per cent decrease from June.

However, lithium phosphate cells are even cheaper, at around 4 cents per Wh. This translates to LFP battery cell prices being 35-40 per cent lower than traditional prismatic batteries. Many EV makers, including Tesla, uses them in their standard range vehicles. Many other manufacturers are following suit.

Experts are even saying that LFP batteries might be better in almost every way. Prices for these cells fell by 2.6 per cent in July.

Energy storage

As of 2023, global lithium reserves are estimated to be about 22 million metric tonnes. But lithium is no longer the only game in town to juice up gadgets with electrons.

Researchers at MIT and Stanford are now investigating battery properties of aluminium, nearly 5,000 times more abundant than lithium. A team of Stanford University scientists have, for example, developed a high-performance aluminum-ion battery, which promises low cost, low flammability, high capacity and fast charging capabilities.

Fresh investments to bring their lab work to mass production could significantly change battery economics. Lithium-based energy storage is also getting disrupted. Over the last 10 years, lithium-ion battery cell prices have dropped from $400/kWh in 2014 to record low average price of $78/kWh in May 2024.

That's an 80.5 per cent drop, according to Benchmark Mineral Intelligence, which tracks industry data. Demand for lithium is up, but so is supply, as more mines get permissions from authorities.

As battery prices decline, stuff that use them become more compelling.

Challenge to EU and US suppliers

Currently, the economics surrounding battery manufacturing poses a huge challenge to European and US suppliers.

Umicore has delayed a C$2.8 billion cathode materials plant in Canada, while BASF and Eramet have also scaled back projects. This diverging approach puts Western producers at risk of falling behind in the EV space.

Western automakers like Tesla, GM, VW, and Porsche are revising their EV outlooks due to slowing demand; but they must commit huge amounts of investments, or face losing out even further.

Where CATL leads

China’s CATL has several competitive advantages in the battery manufacturing sector:

Tech leadership: CATL invests heavily in R&D, leading to innovations such as high-energy-density batteries and enhanced safety features.

Economies of scale: As one of the largest battery manufacturers globally, CATL benefits from economies of scale, reducing production costs and offering competitive pricing.

Vertical integration: CATL controls a significant part of its supply chain, from raw materials to battery production, ensuring stability and cost efficiency.

Strategic partnerships: CATL has formed alliances with major automotive companies, securing long-term contracts and collaboration opportunities.

Global expansion: The company has expanded its manufacturing footprint globally, with facilities in China, Europe, and North America, allowing it to serve a wide range of markets efficiently.

Diverse product portfolio: CATL offers a wide range of battery products, including lithium-ion and sodium-ion batteries, catering to various applications from electric vehicles to energy storage systems.

Sustainability initiatives: CATL is committed to sustainable practices, including recycling initiatives and the development of environmentally friendly battery technologies, which are increasingly important to consumers and regulators.

Solid-state batteries

Solid-state batteries offer several advantages over traditional lithium-ion batteries. They are smaller, lighter, and significantly safer due to the absence of flammable liquid electrolytes.

Samsung's oxide solid-state battery boasts an impressive energy density of 500 Wh/kg, nearly double the industry standard. This breakthrough could potentially double the driving range of electric vehicles to around 600 miles on a single charge.

Fast charging, longevity

Samsung also claims a rapid charging time of 9 minutes, although this likely refers to charging from 20 per cent to 80 per cent.

While impressive, the availability of high-power charging infrastructure remains a challenge. Nevertheless, the company's emphasis on battery longevity, with a target of 20 years, aligns with a growing industry trend towards longer-lasting batteries.

Despite these advancements, Samsung faces tough competition from CATL, BYD and others, who have made significant progress in both solid-state and lithium-ion battery technology.  

Leading battery technologies

The battery landscape is rapidly evolving, with new technologies and improvements emerging constantly. Here's a breakdown of some of the leading battery technologies:

Lithium-Ion (Li-ion) batteries:

Lithium-iron-phosphate (LFP) batteries:

Nickel-Metal Hydride (NiMH) batteries:

Solid-state batteries:

Other emerging battery technologies: