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Between 2010 and 2021, the price of lithium-ion batteries (which are used in electric vehicles, among other things) dropped by 89 percent. In 2022, for the first time, the cost increased, and naive pessimists on internet forums around the world declared that this was the end for electric cars.
However, being a pessimist is challenging because this year the cost has decreased again. Compared to 2022, there's been a 14 percent reduction. This means that the cost has decreased by 90 percent since 2010, according to BNEF.
Besides the overall decreasing cost, the trend is clear that different types of lithium-ion batteries are becoming more similar in cost. Batteries for storage are getting closer to the cost of electric vehicle batteries.
This graph shows that plug-in hybrids will meet the same fate as pure gasoline and diesel cars. 💀
Why is the cost dropping?
This year's reduction is mostly due to a lower price of lithium, but the long-term trend is because of what's known as Wright's Law: For every cumulative doubling of production, the cost falls by about 20 percent.
If you go from 2,000 produced units to 4,000, unit number 4,000 costs 20 percent less.
This means that if the production of lithium-ion batteries continues, the cost will continue to fall. And everything suggests that production will not only continue but increase.
Tony Seba, who has been the most accurate about battery prices, believes that the cost of lithium-ion batteries will decrease by a further 80 percent over the next ten years.
This means that batteries for cars and storage will become dirt cheap.
The Angry Optimist