Lithium-ion batteries have become less expensive for what they do, during the past fifteen years. They dropped an average 7.5% year-on-year between 2011 and 2017. But this process has continued. Some sources suggest a 20% reduction occurred in 2024. This not just a question of economies of scale. There are other reasons why lithium-ion battery prices fell so dramatically.
Wright’s Law Sheds Light on Lithium-Ion Prices
Theodore Wright was an engineer, working in the American aircraft industry in 1936. He noticed that every time production doubled, the labor time per airplane fell by 20%. Other studies have produced different values, but their percentages are mostly steady.
Wright’s law governing this ‘experience curve’ has stood the test of time. But production of batteries has become so mechanized, there must be other reasons why lithium-ion battery prices keep falling. We reflect on other drivers enabling them to remain highly competitive.
Five Reasons That Keep Li-Ion Prices Down
- Mass production in response to soaring customer demand has unleashed economies of scale. This has reduced the per-unit cost of battery cells and packs.
- Experience has helped the industry standardize products. Battery factories have become larger and more automated. There are fewer manufacturing defects.
- Raw material costs have also dropped, as the supply chain matures. Lithium, nickel, cobalt, manganese and graphite mines have scaled up. Recycling has arrived.
- Lithium-ion technology has advanced in leaps and bounds. The amount of energy these batteries store by weight and volume has increased, meaning they now need less raw materials.
- Intense competition among major players keeps prices down too. New chemistries such as lithium iron phosphate avoid the need for expensive cobalt and nickel.
In 2010, lithium-ion packs cost over $1,000 per kilowatt-hour. By 2023, this had fallen to around $140, with lithium iron phosphate batteries even cheaper. Prices could tumble to $100 per kilowatt-hour within a few years from what we have heard. At this point electric cars could be as cheap as their petrol and diesel competition.
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