The cost of battery cells for electric vehicles (EVs) appears to have stabilised at the lower end and may soon begin to rise, according to PB Balaji, Group CFO of Tata Motors. However, the broader battery pack costs and other aggregates could continue to decline as production volumes increase, he noted.
- The batteries are typically the most expensive component of an EV
- EV prices could decline with greater localisation of non-cell components
“I believe the cell prices have more or less stabilised at the lower end. From here on, it will probably start inching up,” Balaji said during a post-earnings conference call. “Let’s wait and see how that plays out.”
His remarks carry weight, given that battery cells constitute a significant share of an EV’s cost structure. Historically, falling cell prices have been instrumental in reducing overall vehicle costs, thereby improving affordability. Lower prices also enable automakers to extend range and enhance efficiency without substantially raising end-user prices.
The broader industry has long viewed a battery pack price of $100/kWh as the threshold for cost parity between EVs and internal combustion engine (ICE) vehicles. S&P Global Mobility’s battery price model suggests that in some cases, battery pack prices have already dropped below this level.
Balaji noted that the recent decline in cell prices had allowed Tata Motors to reduce the retail prices of its EVs. Additionally, the company has begun benefiting from the Indian government’s Production-Linked Incentive (PLI) scheme, which helps control manufacturing costs.
Looking ahead, Balaji expects that as EV adoption scales up, the costs of non-cell components will decline further due to greater localisation. “Even from the (context of) cell-to-battery pack, as volumes start picking up that will also start to come down,” he said. “So, there are enough levers to play for, and most of it will go towards driving vehicle development.”
As the EV industry matures, the interplay between economies of scale, government incentives and technological advancements will likely shape cost trends in the years to come.
Also See:
Government proposes doubling tax rebate for scrapping BS-II or older vehicles
