Goldman Sachs Group, Inc. an American multinational investment bank and financial services company predicts a 40% reduction in electric vehicle (EV) battery costs by 2025, attributing the decline to falling prices of critical minerals. Battery pack prices are expected to decrease by an average of 11% annually from 2023 to 2030, potentially achieving cost parity with internal combustion engine (ICE) vehicles by 2025 without subsidies.
Analysts suggest that nearly half of the cost decline will result from reduced prices of EV raw materials, including lithium, nickel, and cobalt. The shift is accelerated by the emergence of new battery technologies and the commercialization of advancements in manufacturing processes. Goldman Sachs Research projects battery prices to reach $99 per kilowatt hour of storage capacity by 2025, a faster pace than initially forecasted.
This significant cost reduction could lead to more competitive EV pricing, broader consumer adoption, and an expanded market for EVs and batteries. Despite recent decreases in global EV penetration due to subsidy cuts in Europe and China, achieving price parity with ICE vehicles is expected to propel the EV market into a new phase driven by consumer adoption rather than government incentives.
Goldman Sachs’ projections suggest global EV penetration jumping from 2% in 2020 to 17% in 2025, 35% in 2030, and 63% in 2040. In a “hyper-adoption scenario,” EVs could account for 21% of total global vehicle sales by 2025, 47% by 2030, and 86% by 2040.