The 90% Drop: How EV Battery Costs Plummeted Over 15 Years

What a difference 15 years makes. One of the most important reasons drivers have proven resistant to making the switch from internal-combustion engines (ICE) vehicles to electric vehicles (EVs) has been that the latter just cost too darn much. For that reason, even some drivers who recognize the long-term benefits of electrification have nonetheless said, “No—or at least not yet.” But on August 5, the U.S. Department of Energy (DOE) revealed a staggering 90% reduction in the cost of electric vehicle (EV) battery packs over the past 15 years.

According to the DOE’s Vehicle Technologies Office, the cost for a light-duty vehicle’s lithium-ion battery pack has plummeted from $1,415 per kilowatt-hour (kWh) in 2008 to just $139/kWh in 2023. This monumental drop is attributed to a combination of advancements in battery technology, improved manufacturing processes, and increased production volumes. This revelation highlights the rapid evolution of the electric vehicle industry, which has transformed these once niche vehicles into mainstream contenders.

Credit: US Energy Dept.

Roots of high costs in 2008

The exorbitant cost of EV batteries in 2008 was driven by several factors, most notably the nascent stage of battery technology. At that time, lithium-ion batteries were relatively new to the automotive industry, and the technology was far from optimized. The chemistry and design of these batteries were still under development, with significant room for improvement in terms of energy density, durability, and safety.

Manufacturing processes in 2008 were also a significant contributor to the high costs. The production of battery packs was not yet scaled, meaning that economies of scale had not been realized. Small production runs, combined with less automated and less efficient manufacturing processes, resulted in higher costs per unit. The industry was still grappling with the complexities of assembling large battery packs while maintaining quality and safety standards, further driving up prices.

Material costs played a critical role as well. Lithium-ion batteries require a range of expensive raw materials, such as lithium, cobalt, nickel, and manganese. In 2008, the supply chains for these materials were less developed and more expensive to manage, contributing to the overall cost of battery production. Additionally, the high cost of research and development in the early days of EV batteries was often passed on to consumers, further inflating prices.

Factors behind the 90% decline

Over the past 15 years, the landscape of battery technology has evolved at a rapid pace. One of the most significant factors contributing to the 90% decline in costs is the advancement in battery technologies and chemistries. Improvements in lithium-ion battery designs have led to higher energy density and longer lifespans, allowing manufacturers to produce more efficient and cost-effective batteries. As research and development in the field progressed, the industry began to optimize battery chemistries, reducing the reliance on expensive materials and increasing overall performance.

Manufacturing processes have also seen remarkable improvements. Automation and better production techniques have become the norm, reducing labor costs and improving the consistency and quality of battery packs. These advancements have enabled manufacturers to scale up production significantly, with the DOE’s 2023 cost estimate based on a production scale of at least 100,000 units per year—something that would have been unimaginable in 2008. This scale has been crucial in spreading fixed costs across a larger number of units, driving down the per-unit cost.

The evolution of supply chains has also played a pivotal role. As demand for lithium-ion batteries has grown, so too has the infrastructure supporting the extraction, processing, and delivery of critical materials. This growth has led to more competitive pricing for raw materials and a more efficient supply chain, further reducing the cost of battery production.

The dramatic 90% reduction in EV battery pack costs between 2008 and 2023 is a testament to the incredible advancements in technology, manufacturing, and industry experience. What was once a significant barrier to the adoption of electric vehicles is now a key factor driving their widespread and growing acceptance.