What will happen to the price of lithium batteries?

Will it go up? Will it go down? My bet is both.

Seems a bit undecisive? Well it’s a bit more complicated than that.

First off, I want to make it clear that I’m not trying to scream foul here, but rather talk about the realities of where prices may have to go for a sustainable market to exist. Second, these are opinions based on my understanding of the market after running a battery re-manufacturing business for nearly two years.

The car makers

Car manufacturers play a big role in the very real (and the not so real) decline in prices. With the massive supplies needed for vehicles, there was a need for prices to come down, so companies vertically integrated, and bought out years of supplies of raw materials in long term agreements. Meanwhile battery manufacturers had to convince everyone that the price would go down to almost nothing to get everyone excited and onboard with funding their multi-billion dollar production ventures.

So if prices went down 98% in the last 3 decades or so, what am I going on about with the “not so real decline” in prices? I’m talking about what we have started seeing and will see more and more of. A price figure in a press release meant to generate buzz, but that won’t be met in reality. How much were those batteries? 100$ per kWh? Oh but that was off the assembly line and before accounting for actually making the battery usable…. but that’s a minor detail right? This is where things are going to get confusing for the consumer.

The commodity factor

Batteries as a commodity had to come down in price to become a viable option, and come down in price they did. Astonishingly so. But what company wants to run a business with razor thin margins? Do you really think Panasonic will sell batteries at a 6% loss for ever? Once the dust settles and future mergers happen, a few very large companies will remain, and margins will rise. So will prices.

B and C grade cells

So now the consumer has seen in the headlines that batteries cost 100 $/kWh, and some even find them! But the real question is what did they find? For the most part, cells that were rejected by the factory for use in vehicles, where long term use is important, and there is accountability. Essentially, what you can buy new for that price as a consumer is industrial trash that won’t last a third of the expected lifespan, and people will gobble it up. Fueled by greed, as we all can be at times, we will kid ourselves into thinking “they look the same, therefore they are the same”. But the reality is that batteries are incredibly finnicky, and just a few impurities can lead to billion dollar recalls. Why? Because your car might burst into flames. And then what happens to those batteries without proper accountability? They get sold off to some company that will remain unnamed out on the sunshine coast where the cells are sold to unsuspecting customers without disclosure of their past. But when the price is too good, sometimes we don’t ask enough questions.

Replacement Batteries for EVs

Another point that will drive battery prices up, and this time possibly artificially, will be the pressure to keep old vehicles on the road. Replacing batteries in an EV is incredibly difficult, and the fact that OEMs refuse to sell batteries to consumers doesn’t help. However, with push back, and the right to repair movement, it is not unlikely that we will see mandatory availability of replacement battery packs. It will be at the manufacturer’s advantage for the price of batteries to be as high as possible (unlike when they are trying to sell you a new car where it has to be low enough to compete with ICE vehicles), so you can fully expect that it will be.

Ultimately, I predict that the price at retail will remain significantly higher than what we keep seeing advertised, and in a world with raw material shortages, and battery shortages for Tesla, the laws of market dictate that prices must go up.