What Affects the Pricing Trends in the Lithium-Ion Battery Market?

What Affects the Pricing Trends in the Lithium-Ion Battery Market?

Lithium-ion batteries are popular, and they have several advantages over other battery technologies.  The lithium-ion battery price is known to fluctuate. Several factors affect the pricing trends in the lithium-ion market. Want to know which they are, read on.       

Factors Affecting Lithium-Ion Battery Prices

Increased Smartphone Penetration

Contrary to the belief, Li-ion batteries do not cost much. They are mainly used in smartphones, tablets, and other media devices. If you consider the cost of a Li-ion battery used in smartphones, it costs around $2 to $4 depending on the type and capacity. Thus, you can see the battery costs are only 2% to 3% of the overall smartphone price. 

If you look at the smartphone market trend, you can see manufacturers offering large battery capacities, but it has hardly affected the smartphone’s overall price. This is due to the fact large volumes affect the pricing.

The adoption of smartphones is rising across the globe, and the demand is likely to grow. This means Li-ion battery manufacturers will have more significant business opportunities in the coming years.

A look at the decade-old pricing data reveals that Li-ion battery prices have consistently dropped over the years. The lithium-ion battery price has fallen 80 to 85% in the last ten years.

Today, the price of a Li-ion battery is around $176 per kWh. If various studies are believed, they could drop to $60 per kWh in the future. The price reduction is mainly due to the use of Li-ion batteries in smartphones across the world.

Government Pushes Towards Electric Vehicles

Governments worldwide are pushing manufacturers to adopt green initiatives and move from fossil fuel-powered cars to electric cars. Consumers are also welcoming the auto manufacturer’s initiatives of launching electric or hybrid cars.

Lithium-ion batteries power electric cars, and it is expected to drive demand for these batteries. It is a typical market trend- as demand rises and supply increases, prices drop. The same direction is seen in the case of Li-ion batteries. There is a wide range of batteries available in the market for automotive use.

Tesla, a famous electric car manufacturer, buys Li-ion batteries from Panasonic. The huge volumes of Li-ion battery packs ordered by Tesla directly impact the average price of Li-ion batteries. Similarly, other auto companies like Nissan and Volkswagen have clout when it comes to price negotiations. 

The electric car market is expected to snowball across the globe, and it will expand the Li-ion market and further drive the prices downwards. The prices of li-on batteries are falling, and it is a welcoming sign for the electric car industry.  

Prices of Raw Materials

Nickel, cobalt, and lithium are some of the raw materials used in Li-ion batteries. The price of base metals has a 16% share in the average battery price. Similarly, the price of assembly modules, electrolytes, and separator constitute 50% of the average battery price. Even if the costs of base metals rise, it will not significantly impact the price of lithium-ion batteries. 

Investment Capital

Li-ion market research reports have indicated a growing demand for batteries in the future. To meet the increasing demand, leading manufacturers are setting up large manufacturing units in different countries.

For example, the BYD of China has made investment equivalent to $1.49 billion to set up 20 GWh factories in mainland China. Similarly, other manufacturers are also increasing their capacities to meet global demand.

Li-Ion Battery Pricing Trends

If you look at the Lithium-ion battery price trends, you will see some interesting movement. Though the average price of li-ion stands around $176 per kWh, the costs may be lower. The reasons behind this are small trade volumes do not account in average price feeds. 

Battery manufacturers drop prices for large customers to tap more profit in the form of big orders. Some small battery manufacturers continue to sell Li-ion batteries at higher than average market price to keep the profit margins healthy and business afloat.

Battery manufacturers are known to invest heavily in R&D to reduce manufacturing costs and increase battery capacities. Li-ion batteries’ demand is also likely to increase due to governments pushing to tap solar energy. Several governments across the world are offering lucrative incentives to companies harbouring clean energy. The solar energy tapped needs to be stored, and lithium-ion batteries seem to be cost-effective and convenient. 

The post discusses primary factors that affect the li-ion battery prices.  Now, you know what elements need to be watched to get an idea about future price trends on Li-ion batteries.

Tom Spiggle
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