Battery price war in China means cheaper EVs everywhere

The main cost of an electric vehicle (EV) is its battery. The high cost of energy-dense batteries has meant EVs have long been more expensive than their fossil fuel equivalents.

But this could change faster than we thought. The world’s largest maker of batteries for electric cars, China’s CATL, claims it will slash the cost of its batteries by up to 50% this year, as a price war kicks off with the second largest maker in China, BYD subsidiary FinDreams.

What’s behind this? After the electric vehicle industry experienced a huge surge in 2022, it has hit headwinds. It ramped up faster than demand, triggering efforts to cut costs.

But the promised price cuts are also a sign of progress. Researchers have made great strides in finding new battery chemistries. CATL and BYD now make EV batteries without any cobalt, an expensive, scarce metal linked to child labor and dangerous mining practices in the Democratic Republic of the Congo.

Economies of scale and new supplies of lithium make it possible to sell batteries more cheaply. And the world’s largest carmaker, Toyota, is pinning its hopes on solid-state batteries in the hope these energy-dense, all-but-fireproof batteries will make possible EVs with a range of more than 1,200 kilometers per charge.

How are battery makers cutting costs?

The largest market for electric and plug-in hybrid vehicles is China. But demand for EVs here has eased off, dropping from a 96% surge in demand in 2022 to a 36% rise in 2023.

As a result, battery giant CATL has seen its profits fall for the first time in almost two years. One of the best ways to create more demand is to make your products cheaper. That’s what’s behind the cost-cutting promises from CATL and BYD.

You might wonder how that’s