DETROIT – Making electric cars cheaper to buy and own is key to driving the industry’s growth. Because most Americans aren’t going to ditch their familiar gas-powered cars out of the goodness of their hearts or a soft spot for the climate.
For that to happen, batteries need to get cheaper. Some good news on that front: Lithium-ion battery prices will continue dropping fast over the next few years, according to research out this week from Goldman Sachs.
The bank’s researchers forecast that global average battery pack prices will drop to $82 per kilowatt-hour (kWh) by 2026. That’s roughly half of what batteries cost in 2023 ($149/kWh). And it’s a steep 26% drop from this year’s prices, too.
The researchers project that battery costs will fall to $111/kWh by the close of 2024. To really drive home the direction things are headed here, I’ll add that these same batteries cost $780/kWh in 2013.
Goldman Sachs says the projected 2026 prices unlock a key milestone in the U.S. That’s “a level at which battery electric vehicles would achieve ownership cost parity with gasoline-fueled cars in the US on an unsubsidized basis.” Today, the average new electric car costs significantly more than a gas equivalent, although that can be offset by lower fueling and maintenance costs for EVs.
To be sure, new models like the $35,000 Chevy Equinox EV—which has over 300 miles of range—are helping. But that’s far from the norm. And traditional car companies are still struggling to turn a profit on EVs, in part due to high battery costs and low production volumes. Purchase incentives like the $7,500 EV tax credit also help both consumers and automakers, but they can’t support sales indefinitely. For EVs to really take off, buying one will need to be an obvious choice for people.
Parity in total cost of ownership will help drive a strong rebound in EV demand in 2026, Goldman’s researchers say. That makes sense. New cars are already extraordinarily expensive right now, and high interest rates aren’t helping matters. Paying extra to own a new and unfamiliar technology is a hard sell for a lot of consumers. That’s a big reason for the slowdown in EV demand growth the U.S. is currently experiencing.
“We think we’re going to see a strong comeback in demand in 2026 purely from an economics perspective. We believe 2026 is when a consumer-led adoption phase will largely begin,” said Nikhil Bhandari, co-head of Goldman Sachs Research’s Asia-Pacific Natural Resources and Clean Energy Research, in the report.
This story was published by InsidEVs
