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April 25, 2024

Customers win as EV battery prices plummet

As major battery makers slash prices while improving range, there’s fewer and fewer reasons not to drive an electric vehicle.

In the news

In the US, electric vehicles have traversed a bumpy road lately. Even as 2023 US EV sales set records, sales growth plateaued, and skeptics sounded off. As we recently noted, EVs’ price point was a significant factor: When you compare EV sedans to internal combustion sedans, we’re 20% to 25% away from price parity.

While total cost of ownership for EVs vs. traditional vehicles is much closer, according to a recent study, there’s little doubt that the all-important EV sticker price has been scaring away some drivers. Ford appears to have proved this; the company dramatically reduced EV prices earlier this year in the US and has been rewarded with an equally dramatic 86% sales increase.

So, it stands to reason that a pair of recent reports on the falling cost of batteries could further rev up EV sales.

Chinese battery storage maker CATL, the largest such firm in the world, made waves when it announced it will halve the cost per kilowatt hour (kWh) of its lithium iron phosphate (LFP) cells by the middle of this year.

On the heels of that announcement, another major Chinese EV player, BYD, said it will launch a new version of its popular Blade battery (also LFP) this year, featuring increased range at a lower cost. In addition to making its own EVs, BYD sells Blade batteries to Tesla, Toyota, Ford, Kia and others.

If CATL’s claim holds, reports say, the cost of a typical 60kWh battery pack will plunge by more than $3,000 in a 12-month period, leading to a further narrowing of the price gap between EVs and internal combustion cars.

Clearly, there is competition and innovation afoot where LFP batteries are concerned, and car-buyers stand to be the big winners.

The Cognizant take

While price point is one factor that’s been holding back EV sales in the US, it’s not the only one. American consumers also tend to prefer SUVs and crossovers to sedans, and EV offerings remain relatively thin in those categories.

Infrastructure, too, remains an issue. The vast distances Americans commonly drive make the dearth of charging stations an ongoing challenge, especially for non-Tesla users. However, as Aditya Pathak, VP and Head of Automotive, Transportation and Logistics at Cognizant, notes, for most medium distance round trips, customers want just enough top-up recharge to get them back home. “With a typical DC fast charger, that means charging for less than 10 minutes,” he says. “So, charging times vs. gas fill-up times isn’t an issue for 99% of the personal car scenarios.”

Moreover, Pathak says, once the Tesla network becomes accessible to other EVs—a shift expected to begin later this year and pick up steam in 2025—"charger availability will no longer remain a major issue.”

These factors are all very real—but so is the price point. If competition, innovation and regulation in the form of tax incentives make EVs economically desirable, Pathak’s prediction that EVs will own a 60% market share in 12 to 15 years looks eminently reasonable. “Once price parity is achieved for vehicles that can drive 300 miles or more,” he says, “we will see adoption take off rapidly again.”

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