Can Falling Battery Prices Boost European EV Adoption?

There's been a lot of spotlight on European EV adoption in recent months, particularly here in the UK, with high costs often being cited as a key barrier for the everyday driver to switch - particularly those with large families or high-mileage commuters. EVs are still seen as a luxury amongst many segments of society and subsequently they opt for basic to mid range ICE vehicles (particularly 2nd hand) are a more affordable level. See my colleague Stephen Robinson's recent Insights on this topic here. 

The high costs of an EV often comes down to the cost of the battery within them. For the last few years battery costs have peaked due to the increasing demand for EVs and stationary storage and by the end of 2023 was typically sitting around $100 per kWh. 

However, the steady rise of EVs with cheaper LFP cells plus oversupply is meaning costs are falling. The news that CATL and BYD expect to produce battery packs to as little as $56 per kWh by the end of 2024 is a staggering breakthrough. This should be seen as welcome news as lower cost battery packs will help bring down EV costs for the consumer in the end. 

We're already seeing BYD planning a huge entry into the European market and you can expect the likes of NIO and Geely to do the same, with lower-cost mass-market options - this could be the step we need for more people to make the transition!

Although positive, the news does prompt a few questions too. 

- Firstly, when it comes to quality - will these vehicles meet the expectations for consumers in Europe, who are used to the quality of major US or European OEMs? 

- Will European battery companies come anywhere near this level of price drop? We have the EU Battery Passport coming in within 3 years, so there will be increased spotlight on localised battery production, but without a competitive cost, there will still be resistance amongst many. 

- Finally, could Europe eventually follow in the footsteps of the US and introduce import restrictions / tariffs on Chinese EVs / battery packs. If so, the reduced production costs may not actually be reflected in the prices for consumers.

What do you think?

Hyperion is a leading executive search firm in Energy Storage, EV and Future Mobility, helping fantastic innovative companies to hire great senior talent. If you're looking for support in building your team, then contact me today at david.beeston@hyperionsearch.com