Goldman Sachs report: Falling battery prices will boost electric vehicle sales

Battery prices for electric vehicles will drop by 40% by 2025, which will accelerate sales of electric cars, according to a recent report by Goldman Sachs.

To put this in real terms, Goldman’s analysis implies that benchmark battery prices in 2022 were in the $165/kWh price range. For example, a standard crossover EV (like a Tesla Model Y RWD) typically has a 60 kWh battery, meaning the battery pack in 2022 would cost around $9,900. By 2025, battery prices will drop 40% to $99/kWh, Goldman estimates, meaning the same battery pack will cost just $5,940.

Goldman also predicts that battery prices will drop by an average of 11% by 2030, to $72/kWh. Such savings will translate into EVs reaching cost parity with petrol cars without subsidies by mid-decade, which is likely to drive sales growth.

“Decreasing battery costs could lead to more competitive pricing for electric vehicles, greater consumer adoption and further growth in the TAM (total addressable market) of electric vehicle batteries,” Goldman analysts wrote.

However, the global battery market is not the same depending on which part of the world an automaker operates in, Goldman analysts wrote.

“We believe that the passage of the Inflation Reduction Act (IRA) represents a strong commitment by the US government to drive battery self-sufficiency, leading to the regionalization of the global battery market – a US-Korea market, more isolated from China’s surplus and focused mainly on ternary batteries, and a well-supplied China-Europe market increasingly focused on LFP batteries,” the analysts wrote.

This means that, from an investment perspective, Goldman prefers investors to buy shares in the US-Korea battery chain, with LG Chem, LG Energy Solution, Samsung SDI, Panasonic and Tesla among the top choices.

On the other hand, Chinese battery makers such as CALB and Gotion may “experience increased pressure on margins” due to difficulties in exporting surplus batteries.