Lithium-ion (Li-ion) battery pack prices dropped 20% from 2023 to a record low of $115/kWh, the most significant annual decline since 2017, according to BloombergNEF (BNEF). The price reflects a global average that varies across geographies and application areas.

The price decline is driven by factors such as overcapacity in cell manufacturing, economies of scale, lower metal and component costs, adoption of lithium-iron-phosphate (LFP) batteries, and slower growth in electric vehicle (EV) sales.

Battery manufacturers have significantly expanded production capacity over the past two years in anticipation of increased demand from the EV and stationary storage sectors. However, BNEF reported that the current global capacity has reached 3.1 TWh—more than 2.5 times the annual demand for Li-ion batteries in 2024.

Although demand grew year-over-year across all sectors, the EV market—the most significant driver of battery demand—experienced slower growth than previous years. The stationary storage market expanded considerably, particularly in China, where provider competition intensified.

Evelina Stoikou, head of BNEF’s battery technology team, explained, “The price drop for battery cells this year was greater than the decline in battery metal prices, indicating that manufacturers are facing tighter margins. Smaller manufacturers are under pressure to reduce cell prices to remain competitive.”

According to BNEF, battery prices for electric vehicles fell below the $100/kWh threshold for the first time, averaging $97/kWh. While EVs have achieved price parity with combustion vehicles in China, they remain more expensive in many other markets. BNEF projects that more segments will reach price parity globally as lower-cost batteries become increasingly available.

Regionally, China recorded the lowest average battery pack prices at $94/kWh, while costs in the U.S. and Europe were 31% and 48% higher, respectively. The broader price gap compared to previous years highlights China’s intensified competition and its impact on margins, prompting manufacturers to explore new markets such as energy storage and export opportunities.

Low raw material prices have also contributed to declining battery costs, though future price increases may arise due to geopolitical tensions, tariffs, and stalled mining and refining projects.

BNEF predicts a further reduction in pack prices by $3/kWh in 2025. Looking ahead, investments in research and development, process enhancements, and supply chain expansions will drive technological innovation and cost efficiency. Emerging technologies such as silicon and lithium-metal anodes, solid-state electrolytes, advanced cathode materials, and new cell manufacturing processes are expected to significantly reduce battery prices over the next decade.

Prices of Li-ion battery packs dropped by 14% to $139/kWh in 2023 due to falling raw material and component prices. However, battery pack prices rose 7% to $151/kWh in 2022.