EV Sector Outlook: Battery Prices Are Predicted to Plunge. What Investors & Consumers Can Expect.


  • Battery prices have continued to decline and are expected to see this decline protract as metals prices come down.
  • For EV investors, this hasn’t helped margins as much as may have been expected, due to cost-cutting wars.
  • For EV investors and EV buyers alike, now may be a good time to remain patient.
EV sector outlook - EV Sector Outlook: Battery Prices Are Predicted to Plunge. What Investors & Consumers Can Expect.

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From Tesla (NASDAQ:TSLA) to a range of smaller EV makers, investors in the electric vehicle revolution certainly have plenty of options to consider. That’s not including battery makers, who continue to innovate toward new technologies, providing better technology at cheaper prices. For a long time, the outlook for the EV sector remained very bullish. It’s true that as battery prices plunge, EV makers could stand to make more.

Right now, the question is: Will they?

After all, while demand has outpaced supply for most EVs in recent years (Tesla investors can attest to this), higher interest rates and other macro headwinds have cooled demand, with the amount of new electric vehicles produced by competing EV makers increasing every year. In combination with competition from global competitors (particularly those out of China), this has led to price wars in the sector.

That’s great for consumers. And while plunging battery prices may blunt the blow for certain EV makers, margins remain the key question facing many investors right now.

With Goldman Sachs (NYSE:GS) predicting ever-cheaper batteries by 2025, electric vehicles could become more affordable. But let’s take a look at the EV sector outlook and what it means for investors (as well as car buyers).

Battery Price History

Battery cell prices have dropped quickly, similar to solar cells. CATL, the top battery maker in the world, said lithium battery prices have fallen by 50% since last summer.

Initially ranging from 0.8 to 0.9 RMB/Wh ($0.11 to $0.13 USD/Wh) in early summer 2023, prices have since decreased, with some buyers acquiring cells at 0.4 RMB/Wh. Leapmotor CEO Cao Li predicted prices may drop to 0.32 RMB/Wh this summer, marking a potential decrease of 60% to 64% within a year.

EnergyTrend noted a convergence in pricing between energy storage and EV battery cells. Other experts have highlighted advancements like faster charging and higher energy density in these cells as reasons for this convergence. Notably, Goldman Sachs attributes the price decline to a slight decrease in electric vehicle adoption, revising its global battery demand growth forecast to 29% for 2024, down from 35%.

These price drops stem from various factors, including stabilizing demand in the EV market. The more consistent demand has led to reduced speculative trading in metal futures. Additionally, supply chain enhancements, lower inflation and new lithium sources have played roles in these forecasted declines. Although metals like copper are lower relative to their pandemic highs, these metals still haven’t reached pre-2020 levels.

Goldman Says the Plunge Will Not End Anytime Soon

Goldman Sachs has cautioned against premature optimism regarding the battery raw materials market, citing persistent oversupply and challenges in the Western EV sector. In a recent research note, analysts highlighted the downward trend in the overall energy transition affecting metal prices, such as those of nickel, copper, lithium and cobalt.

The outlook remains pessimistic, especially for nickel, lithium and cobalt, crucial components for various applications, including EVs and renewable energy technologies.

Goldman Sachs analysts, led by Nicholas Snowdon noted a considerable reduction in margins leading to supply cuts in lithium and nickel, coupled with downgrades in Western electric vehicle demand.

Despite those factors, substantial supply pipelines are expected to maintain sizable surpluses in lithium and nickel, prompting the bank to project further declines of 12%, 15% and 25% in cobalt, nickel and lithium carbonate over the next 12 months, respectively.

Analysts at Goldman Sachs have changed their 12-month price predictions per metric ton accordingly: $26,000 for cobalt, $15,000 for nickel and $10,000 for lithium carbonate. Moreover, China’s lithium carbonate prices sit at $15,071, showing a 70% decrease from 2023.

Nickel and cobalt prices on the London Metal Exchange (LME) were recorded at $17,945 and $28,550 per metric ton, respectively. Analysts caution that oversupply continues to dampen the outlook for EV battery metals.

Wrapping It Up

In this world of lower battery metals costs and plunging prices, one might think EV stocks are worth betting on right now. After all, lower input costs (and higher gas costs) should be positives for the EV transition.

However, as mentioned, demand-side dynamics appear to affect these prices as much as supply-related impacts. The green energy transition is happening slower than expected. So, for investors, buying that hot EV stock may not translate into the kind of gains one may have previously hoped.

For consumers, this reality of declining costs over time could mean lower EV prices in the future. Thus, some EV buyers may be patiently waiting on the sidelines, looking for the right price before pulling the trigger.

So, it’s tough to be an EV investor or an EV buyer right now. I think waiting on either makes sense. I’m looking to buy an EV myself, but am going to wait a year or two, partly for these reasons.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2024/03/ev-sector-outlook-battery-prices-are-predicted-to-plunge-what-investors-consumers-can-expect/.

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