Muthu Krishna, senior analyst and battery cost modeller at price data and research firm Fastmarkets, argues that better cell energy density and charging infrastructure are necessary to bring EVs to price parity with ICE vehicles.
Battery technology is key for a sustainable future, especially in transportation. But as the demand for electric vehicles rises, so does the demand for the materials inside the batteries, particularly lithium, cobalt, nickel, and graphite, all of which must be mined and refined via complex, energy-intensive processes.
Battery costs are still far too high and currently make up around 30-40% of the cost of an electric vehicle (EV). So how do we reduce these costs in order to produce affordable EVs? Firstly, improving cell energy density is necessary to bring EVs to price parity with internal combustion engine (ICE) vehicles. Today’s technology will not enable the $100/kWh battery pack (the point at which EVs become comparable in cost to ICE vehicles).
Secondly, passenger BEV packs are oversized for much of our driving use and must be reduced in size. Both strategies together will ease raw material demand, which will reduce raw material prices and volatility (and provide time for the nascent supply chain to mature sustainably), thereby reducing cell, battery pack and EV cost.
Cell costs down substantially in 2023
The Fastmarkets Battery Cost Model, built using academic and industry data, accounts for the key factors that affect cost, such as raw material spot prices, cathode chemistry, cell design and manufacturing location. The latter includes cost of goods sold, operational costs and accounts for yield losses observed during cathode, anode and cell production as a function of annual production rate (GWh/yr).
The model calculates that for November 2023, NCM811 prismatic cells on average had a cost of $80/kWh in China, down substantially from $123/kWh back in January 2023. For the US, the cost is greater, around $109/kWh in November compared to $152/kWh in January. The cathode accounts for around 50% of these total costs, and the volatility in its raw material prices has a major influence in the downstream cell costs.
Energy density and complexity determine pack prices
Cells make up most of the cost of a battery pack, around 83% for a passenger BEV LFP pack and 78% for a similar NCM pack; (non-cell pack costs for LFP are less than for NCM on a kWh basis as LFP is a more thermally stable material, allowing for a more simplified pack design).
In 2023, the global average NCM811 BEV pack cost was $120/kWh (weighted by different production rates across the world). As raw material prices fall, today’s NCM811 technology is expected to decrease to $103/kWh by 2030, which is insufficient and too late to decarbonise the transportation sector.
If energy density (Wh/kg) were increased fewer cells would be required per GWh, greatly reducing material cost. Next-generation NCM with a nickel content of >90% is expected to boost cell energy density by 28% to 320Wh/kg and cost 19% less than today’s NCM811 cells. In the model’s base scenario, this would bring the global average pack cost for next-gen NCM down to $86/kWh by 2030, depending on how quickly these cells can be mass produced and integrated into packs.
LFP is the only mature technology that will reach $100/kWh in 2024 and must play a key role in accelerating the electrification of the transport sector.
In China, the average LFP BEV pack is expected to reach $97/kWh in the base scenario this year. Adding manganese to the cathode to produce LMFP will boost LFP cell energy density by 26% to 215Wh/kg, which will bring costs down by 14%. LMFP packs could reach $85/kWh by 2026 and $78/kWh by 2030, which would significantly boost the production of affordable EVs. Increasing energy density and relying more on LFP/LMFP, particularly for the mass auto market, is therefore crucial to transitioning to electrified transportation.
Oversized packs create supply strain
Passenger BEV packs will account for around half of the total battery GWh demand over the next 10 years. However, there is a key issue – pack sizes for BEVs are currently oversized.
Over the next 10 years, the average pack size is expected to be 79kWh for North America, 67kWh for Europe and 68kWh for the rest of the world. Only in China, where city use dominates, will the pack size remain low at around 40-42kWh. It is clear that BEV battery packs outside China are oversized, providing far more range than most customer use cases require (official data shows 95% of all trips in the US are under 50km and 99% of all trips in the UK are less than 160km).
Consumers do not need more range. They need access to more chargers, and specifically fast chargers. “Range anxiety” should be re-labelled “charger anxiety”, as the infrastructure is woefully lacking.
This relentless rise in range and battery pack sizes is heading to an inevitable squeeze, making it harder for supply chains to keep up. Simply by reducing the battery pack size and improving charging infrastructure, range anxiety will decrease whilst reducing raw material demand.
For example, if the average BEV pack sizes for the next 10 years outside China are reduced by only 15% (e.g., 79KWh for North America becomes 68kWh), then the lithium carbonate equivalent (LCE) demand will decrease by just over 1 million tonnes across this period.
That is enough LCE to produce 40 million LFP 50kWh BEV packs offering around 300km range, sufficient range for most motorists. Furthermore, for cobalt and nickel metal, the demand would drop by 102,000 and 800,000 tonnes respectively.
Important role for LFP/LMFP
LFP/LMFP will play an important role in the years ahead. LMFP packs are expected to be 8% cheaper per kWh than next-generation NCM. LFP specifically is well suited to the increased demands of smaller batteries, such as having a longer cycle life than NCM and being able to operate between wider states of charge. They both contain zero nickel and cobalt, and so do not invite the ESG concerns surrounding these metals.
Smaller battery packs will slash BEV prices, which will promote uptake and accelerate recycling streams due to increased supply of aged batteries. Along with correctly sizing BEV battery packs, the EV industry, together with policymakers and regulators, must focus on improving the charging infrastructure if we are to successfully transition to green, electrified transportation.
