Electric cars may only get cheaper from here

If you haven't made up your mind on buying a new electric car, it may be worth waiting.

Tata Motors, Hyundai and MG Motor India have taken the lead in offering deep discounts on their electric cars in India this year.

Globally, Elon Musk-led Tesla is locked in a price war with peers like BYD in China. Ford, Toyota, Kia, and Chevrolet have followed suit.

The discounts on electric vehicles may get even better. The cost of making an electric vehicle will come down and that would make the EVs even more cheaper.

Aside from rising competition and a cool-off in demand, the biggest contributor to the fall is likely to be the reduction in the cost of batteries, which is the most expensive part of an EV.

The fall in battery prices is a global trend. Goldman Sachs Research expects battery prices to fall nearly 40% by 2025.

In fact, a recent report said that EV prices would be at par with that of traditional combustion engine cars in some markets next year.

“The battery comprises 35-40% of the price of the EV and as we had projected, even it has come down from the $100 per kilowatt hour further down. So, the prices are bound to come down and they will come down quickly,” Anil Srivastava, former Principal Advisor at NITI Aayog, said in a conversation with CNBC-TV18.

Why will EV battery prices come down? 

First, the price of metals that go into making a battery has come down sharply in the last 18 months.

The bear market in metals like lithium, nickel, and cobalt may continue.  Analysts at Goldman Sachs expect a fall of 12% in cobalt, a 15% fall in nickel and lithium to be 25% cheaper in the next 12 months.

The other reason for the fall in battery prices is innovation. "Manufacturers are finding ways to simplify the manufacturing of batteries... to use materials, like silicon, that may reduce charging time and increase energy density," Goldman Sachs said.

The emergence of solid-state batteries is another example of innovation in the space.

Solid-state batteries use thin layers of solid (instead of liquid) electrolytes, which carry lithium ions between electrodes.

The solid-state batteries were initially used in pacemakers and smartwatches and now they are making their way into electric cars. They would carry more energy for the same amount of weight as current batteries, be less flammable and get charged faster.

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