The Cost Of EV Batteries Will Hit A Key Milestone In 2026, Says Goldman Sachs

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A quick quiz: what was the cost of EV batteries in 2008? They cost a whopping $1,355 per kilowatt-hour, that’s how much. Back then, the goal of an $80/kWh EV battery seemed ridiculous and the oil industry was laughing all the way to the bank. They are still laughing, but not for long. The advantages of owning an electric vehicle are coming into sharper focus and the cost of EV batteries is dropping down to within shouting distance of that $80 goal, pulling the total cost of EV ownership down along with it.

EV Batteries And The Total Cost Of Ownership

To be clear, the total cost of EV ownership over a period of time, including fuel and maintenance, has been close to, or at parity with, comparable gasmobiles for many years. The deciding factors for any particular vehicle vary, but drivers in the US are owning their cars for longer periods — they hit a record average of 12.5 years in 2023 — so that long-term fuel and maintenance savings advantage for EVs can tip the balance.

The total cost of ownership advantage began to surface as early as 2013, when Edmunds compared the cost of owning a Toyota Prius with a Chevy Volt over a five-year period, including fuel and maintenance. The plug-in hybrid Volt was the precursor to GM’s on again, off again (now possibly on again) 100% electric Bolt. In Edmunds’s analysis, the Volt came out thousands of dollars ahead of its own retail price and it beat the Prius, too.

GM launched the Volt with a cross-country tour in 2010 as a love letter to drivers who were attracted by the idea of an all-electric ride but wanted the security of an on-board gas tank, too. Unlike other hybrids, the Volt did not have an internal combustion engine. The gas tank was for powering an onboard generator to supplement the battery pack on longer trips.

GM halted production in 2019, but it’s no surprise to see a Volt on the road today. I spotted a couple just last weekend, on a 1,200-mile round trip up and down Interstate 81.

The Cost Of EV Batteries Is Heading Down, Down, Down By 2026

Even with the total-cost advantage and an assist from various tax credits, getting prospective EV buyers over the hump of higher upfront costs has been a challenge. The high cost of EV batteries has been the main sticking point.

According to a new analysis from Goldman Sachs, the battery issue is going to be a non-issue just about two years from now. “Global average battery prices declined from $153 per kilowatt-hour (kWh) in 2022 to $149 in 2023, and they’re projected by Goldman Sachs Research to fall to $111 by the close of this year,” the firm summarized in an article posted on October 7.

“Our researchers forecast that average battery prices could fall towards $80/kWh by 2026, amounting to a drop of almost 50% from 2023, a level at which battery electric vehicles would achieve ownership cost parity with gasoline-fueled cars in the US on an unsubsidized basis,” Goldman continued.

Answering a Q&A in the same article, analyst Nikhil Bhandari emphasized that “in markets such as the US, the total cost of ownership parity will still arrive starting in 2026.”

If you’re wondering why Bhandari indicates that TOC parity is not here yet, that’s a good question. Bhandari — who is the co-head of Goldman Sachs Research’s Asia-Pacific Natural Resources and Clean Energy Research — notes that when Goldman researchers included resale value in its TOC calculations, they found something interesting.

As explained by Bhandari, auto buyers are delaying the purchase of an EV in anticipation of costs falling significantly within the next few years. That reluctance has put downward pressure on EV resale value, which in turn puts upward pressure on the firm’s cost-of-ownership calculation for current EV owners.

Still, that is a temporary hitch, not a long-term trend.

“We believe 2026 is when a consumer-led adoption phase will largely begin,” Bhandri emphasizes.

Watch Out For The EV Battery Monopoly

Bhandri attributes the drop in costs to a number of factors familiar to those of you who follow CleanTechnica. Technology improvements that jack up performance without raising costs are one main driver. New methods for saving space within a battery pack have also helped to drive down costs. Another is a drop in the cost of lithium, cobalt, and other metals used in EV batteries (see more battery background here).

This is all great news for EV advocates, but Bhandri does suggest that over the long run, further innovation in the field of EV batteries could be cut off by consolidation in the industry.

“There are five companies which control nearly 80% of the market share. Each has been in the industry for over two decades, and they’ve intensified their R&D spend even more aggressively in the last three to five years,” Bhandari notes. “That is creating a vicious cycle that is making it tough for anyone else to compete.”

“Newer entrants are coming into the market during a cyclical downturn, and many are finding it difficult to survive given that they haven’t achieved the right level of manufacturing efficiency,” Bhandari adds.

So Many Reasons To Buy An Electric Vehicle Right Now

If you have any thoughts about the outlook for next-generation EV batteries of the future, drop a note in the comment thread. In the meantime, the big question is whether or not prospective EV buyers should hold out for 2026 to come around.

Some automakers are pulling out all the stops to convince prospective buyers to stop focusing on the cost of EV batteries and focus on the advantages of owning an EV instead. Ford, for example, is offering a free EV charger with hassle-free installation as part of a strategy focusing on home EV charging. The company is also promoting rooftop solar panels and bi-directional charging, which come in handy during power outages.

Personal stories about the advantages of EV ownership will also play an important role over the coming years. Last week, Ford posted an article by Ford Lightning EV owner and farmer Chris Yamamoto of Little Ducky Flower Farm in Illinois.

Calling the truck “a total gamechanger for our work around the farm,” Yamamoto notes that the Lightning’s EV batteries have plenty of power to get through a day of off-site errands and farm chores, including towing, without stopping for a recharge. He also lists extra storage space in the front trunk, the convenience of overnight home EV charging, ease of recharging electric power tools, and noise-free idling among the advantages compared to a conventional pickup.

“If we ever lose power on the farm, I feel secure knowing my truck can keep the essentials running by using Pro Power On-Board,” Yamamoto also adds, in what has become a key reason to buy an EV sooner rather than later.

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Photo (cropped): The cost of EV batteries will probably keep falling over the next two years, but there are good reasons to buy an electric vehicle sooner rather than later (courtesy of Ford Motor Co.).