EV battery prices will decline faster than expected, according to predictions by Goldman Sachs Research, in turn advancing EV price parity with internal combustion engine vehicles.

Global average battery prices dropped from $153 per kilowatt-hour in 2022 to $149 last year, and are estimated to hit $111 by the end of 2024, researchers estimate.

They could fall as low as $80/kWh by 2026, nearly halving from 2023 levels, Kallanish reports. At this point, battery electric vehicles (BEVs) in the US would reach price parity with petrol-fuelled cars without the need for subsidies.

“Admittedly, that leaves near-term EV battery demand more dependent on regulations, especially next year,” says Nikhil Bhandari, co-head of Goldman Sachs Research’s Asia-Pacific natural resources and clean energy research. “But we think we’re going to see a strong comeback in demand in 2026 purely from an economics perspective. We believe 2026 is when a consumer-led adoption phase will largely begin.”

A key driver for this trend is technological innovation, as new battery products can have 30% higher energy density at a lower cost than their predecessors. This is achieved by eliminating modules that contain cells, and instead using cell-to-pack technology, which saves space.

Another major enabler is the continued downturn in the prices of battery metals, which account for 60% of the final product cost.

According to Bhandari, over 40% of the projected decline in battery prices comes from lower commodity costs, reversing the so-called “green inflation” seen in 2020-2023, which fuelled the price of certain battery metals.