EVs to Reach Price Parity with Gas Cars by 2029 Due to Falling Battery Costs: Study

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EVs to Reach Price Parity with Gas Cars by 2029 Due to Falling Battery Costs: Study

Electric vehicles (EVs) have become more accessible in places like China, largely due to lower raw material costs. In the U.S., however, the path to widespread EV adoption is complicated, with significant reductions in raw material prices not expected until the decade’s end. This insight comes from recent research by the International Council On Clean Transportation (ICCT).

The high cost of EV batteries, essential for their operation, is driven by the need for critical minerals such as lithium, nickel, manganese, and graphite. Lithium, in particular, has seen a dramatic increase in demand, earning it the nickname “white gold” due to its pivotal role in the transition away from fossil fuels and towards electrification.

Most of the world’s lithium supply currently comes from open-pit mines in Australia and evaporation ponds in South America’s “lithium triangle” – Argentina, Bolivia, and Chile. However, this landscape is expected to shift as the U.S. ramps up its lithium extraction and refining efforts. According to the ICCT, over 100 lithium mining and refining projects are in progress in the U.S. and its trade partners.

New data highlights the potential benefits of increasing domestic lithium production, underscoring its importance for the future of electric vehicles.

The International Council On Clean Transportation (ICCT) projects that by 2032, the U.S. will need around 340 kilotons per annum (ktpa) of lithium carbonate equivalent for light-duty electric vehicles (EVs). However, the anticipated production from the U.S. and its trade partners will significantly exceed this demand. By 2025, lithium extraction and refining capacities are expected to reach 1,310 ktpa and 1,030 ktpa, respectively, with both capacities expanding to over 2,000 ktpa by 2032.

Currently contributing less than 2% to the global lithium supply, the U.S. is poised to increase its share to 17% by 2032. This growth indicates that the U.S. will secure a lithium supply far exceeding the projected demand for light-duty and commercial EVs. According to ICCT estimates, demand could represent only 17%-33% of the total announced supply.

The availability of other essential minerals like nickel, manganese, and graphite must also rise to meet battery production needs. Should this occur, it could result in more cost-effective batteries and, consequently, more affordable EVs. Cost projections for battery packs suggest a decline from $122 per kilowatt-hour in 2023 to approximately $91/kWh by 2027, and further down to $67/kWh by 2032.

According to ICCT estimates, by 2028-2029, the average cost of a new EV with a 300-mile range is expected to align with that of a comparable gas-powered vehicle. While this forecast points to a future several years away, it’s important to remember that battery manufacturing facilities are still under development and may not operate at full capacity immediately. Moreover, these predictions hinge on the Environmental Protection Agency’s (EPA) proposed multi-pollutant standards for 2027-2032, which aim for 67% of new light-duty vehicles to be electric by 2032.

However, the Biden administration is considering scaling back these ambitious EPA guidelines following extensive lobbying by automotive groups, dealers, and manufacturers. Any adjustments to these regulations could influence the decline in battery prices, potentially affecting the timeline for when EVs become an economically viable option for the average consumer.

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