Lux Research: Li-ion battery costs to drop to as low as $172/kWh by 2025; big boost for EVs in mid- to late 2020s
The electric vehicle opportunity is set to expand, as leading battery developers such as Panasonic drive down prices of Li-ion battery packs by 35% to $172/kWh in 2025, according to a new report, “Crossing the Line: Li-ion Battery Cost Reduction and Its Effect on Vehicles and Stationary Storage,” by Lux Research. However, only the best-in-class players will achieve that cost threshold, while others lag at $229/kWh.
The estimate is based on a new bottom-up cost model built by Lux Research in an industry known for being highly secretive about its costs. The model accounts for differences in battery chemistry, form factor, production scale, location and other nuances.
High battery prices have led to some huge missed opportunities in the electric vehicle market. Now if developers can drive down prices to $200/kWh or less at the pack level, they have a chance of selling millions of EVs by the mid- to late-2020s, and reap great revenues.—Cosmin Laslau, Lux Research Senior Analyst and lead author
Lux Research analysts used primary interviews and research to build out its cost model for Li-ion batteries and evaluate the new opportunities emerging for developers and OEMs. Among their findings:
Competitive gap is widening. Technological innovation and scale are helping leaders like Panasonic, in partnership with Tesla, widen their competitive advantage. While Panasonic-Tesla and China’s BYD will achieve $172/kWh and $211/kWh at the pack levels, respectively, the Nissan-AESC partnership risks falling behind at $261/kWh unless it changes technologies and production strategies.
Disruptive Li-rich NMC will deliver more gains. In 2025, a disruptive Li-rich NMC would bring in cost gains of $17/kWh over conventional NMC/graphite cells. While scale-up efficiencies like Tesla's “Gigafactory” remain a key strategy, geographical location and technology like high-voltage cathodes are also key factors.
Benefits for the stationary storage market. Li-ion cost reduction will positively impact the stationary storage market as well. However, it will not address added costs like the power conditioning system, land, construction and integration. Therefore, installed stationary systems spanning from residential to grid-scale will range from $655/kWh to $498/kWh in 2025, respectively.
The report is part of the Lux Research Energy Storage Intelligence service.