Dampened Demand Leads To 10% Drop In EV Battery Prices, More Declines Expected
Market research firm TrendForce has reported a significant development in the electric vehicle (EV) and battery market, stating that a decline in demand has triggered a 10 per cent drop in battery prices used for EVs and energy storage during the month of August.
The decline in battery prices is anticipated to continue throughout the year, bringing about new challenges and opportunities for the industry.
The primary driver of this price drop has been a reduced demand for electric vehicles. Tesla, a prominent player in the industry, initiated a price war in January to stimulate demand, which has, in turn, led to a shift in market dynamics. This strategy aimed to make electric vehicles more accessible to consumers, potentially boosting sales and driving further adoption.
During the pandemic, the prices of battery materials soared to record highs, fueled by lower borrowing costs and surging demand for EVs. However, as conditions have evolved, prices have been gradually decreasing. This situation raises concerns for automakers, as continued production of EVs at a pace that surpasses demand may force them into a difficult decision. They might have to choose between reducing prices and profit margins to maintain sales or slowing down assembly lines, which could further impact the demand for batteries.
Lithium iron phosphate (LFP) cells, commonly used in energy storage systems and cost-effective EVs, have also experienced a decline in prices. Although these batteries were initially developed in the United States, China has emerged as the global leader in LFP battery production.
Additionally, the energy storage market is experiencing a decline in prices for batteries used in this segment. Weak demand outside of China has compelled battery manufacturers to scale back production in an attempt to stabilize prices amidst oversupply.
TrendForce predicts that China's storage cell production capacity has created a scenario where a price war in the battery market seems unavoidable. Consequently, a continued gradual decline in battery prices is expected for the remainder of the year.
Notably, this market shift is not limited to the EV industry. Consumer electronics such as smartphones and laptops, which utilise lithium-ion batteries similar to those in EVs, have also experienced a drop in demand from their pandemic-driven highs. Battery cell suppliers have been focused on depleting existing inventories due to the lower demand experienced in August.
Interestingly, Information Minister Anurag Thakur announced on Wednesday that India is poised to provide USD 452 million in incentives to encourage companies to establish battery storage projects, with the aim of enhancing the nation's green energy capabilities.
