Categories: Environment

Why could the price of batteries for electric cars decrease further?

In recent months, we have seen a drop in the price of batteries. What looks like good news may not be good news in the long term.

The electric car market is experiencing steady growth, even if it is a little slower than in the past. Last August, for example,The drop in demand led to a 10% drop in battery pricesboth for electric cars and for stationary storage systems.

And that’s just the beginning. According to forecasts by TrendForce, a company specializing in market research and analysis, by the end of the year, prices should fall further. Even commodity prices, which reached new highs during the post-pandemic months, have since started a downward trend.

And it’s not just lithium-ion batteries that are affected, since even batteries announced as “revolutionary” have seen their prices drop, starting with NCM accumulators (nickel, cobalt and manganese), just like batteries LFP (lithium iron phosphate).

A necessary breath of oxygen?

The drop in battery prices will allow manufacturers to “breathe”. Indeed, the latter have experienced months of continuous drop in prices, but this price war (initiated by Tesla), if it has made it possible to maintain demand at a high level, significantly reduced profits.

Today, with more affordable prices for batteries, manufacturers have lower costs to bear and see their margins increase slightly, even without upward adjustments in car sales prices. But is everything okay then? Both for manufacturers and for customers? Yes and no.

How far will the price of batteries fall?

The problem is that in the short term, a drop in demand pushes manufacturers to offer their cars on the market under more favorable conditions. As we stated above, it is about encouraging purchases. But if the market remains “cold” and demand does not start to rise again, manufacturers must protect themselves by slowing down production and, as a result, reducing orders from suppliers.

The suppliers being the manufacturers of batteries, in turn, seeing a drop in demand from manufacturers, reduce prices and slow down production. This therefore leads us into a vicious circle which may ultimately benefit no one, not even consumers, who find themselves caught in a macroeconomic scenario that is far from healthy.

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