Goldman Sachs Predicts EV Battery Cost Milestone by 2026

Goldman Sachs Predicts EV Battery Cost Milestone by 2026

New York, USA | October 2024
Goldman Sachs has forecasted that the cost of electric vehicle (EV) batteries will drop significantly to $80 per kWh by 2026, marking a pivotal point for the EV industry. This decline is expected to bring EV ownership costs in line with gasoline-fueled cars, even without subsidies. The decreasing battery prices, coupled with technology improvements and cost reductions in critical materials like lithium and cobalt, are pushing EVs closer to cost parity with conventional vehicles.

The Journey of EV Battery Costs

  • In 2008, EV batteries cost a staggering $1,355 per kWh. Today, the global average has fallen to $149 per kWh.
  • Goldman Sachs projects prices to reach $111 per kWh by the end of 2024, eventually hitting the $80 milestone by 2026.
  • At this cost level, EVs will achieve a significant total cost of ownership (TCO) advantage, attracting more consumers towards electric mobility.

Total Cost of Ownership Advantage

While the TCO for EVs has been approaching parity with gasoline vehicles, the high upfront battery cost has hindered widespread adoption. Analysts from Goldman Sachs, including Nikhil Bhandari, indicate that 2026 will mark the point when EVs become more attractive due to lower lifetime costs. Including fuel savings and lower maintenance, EVs already offer long-term advantages, especially as more consumers keep their vehicles for extended periods—an average of 12.5 years in the US.

Why Wait Until 2026?

Despite falling costs, some potential EV buyers are delaying their purchases, anticipating even lower prices in the next few years. This hesitancy affects EV resale values, which currently influences the overall cost of ownership. However, Goldman Sachs views this as a short-term issue, predicting a consumer-driven adoption phase starting in 2026 as prices stabilize and infrastructure improves.

Innovations and Market Dynamics

Goldman Sachs attributes the price drop to several factors:

  • Technology advancements: Enhancements in battery performance and efficiency without increasing costs.
  • Material cost reduction: Declines in lithium, cobalt, and other essential metals used in EV batteries.
  • Consolidation in the industry: A small number of major companies control 80% of the market, leading to economies of scale but also limiting competition.

Implications for EV Adoption

The anticipated drop in battery costs will drive the next wave of EV adoption, making electric vehicles more accessible and affordable globally. By 2026, as more automakers offer cost-effective models and governments continue supporting EV adoption with incentives and infrastructure investments, the shift to electric mobility will accelerate.