Pricing of LFP prismatic cells 2024

In this 2 min read you'll learn: the reason why LFP cell prices are dropping in 2024.

During our recent visits to numerous cell manufacturers across China, we observed that many still have significant capacity left to fill. Despite this overcapacity, factories are actively cutting deals to boost revenue, focusing more on maintaining production volume than on securing profit margins. Manufacturers are eager to secure business, offering competitive pricing to stay ahead in an increasingly crowded market.

This aggressive pricing is reflected in the sharp decline in battery prices over the past year. Lithium iron phosphate (LFP) battery cells, for example, have dropped by 54%, now costing just $49 per kilowatt-hour compared to the global average of $95/kWh last year. Several factors are driving these price cuts. Raw material costs, particularly for the cathode—the most expensive part of a battery—have fallen from 50% of total costs at the start of 2023 to under 30% today.

Additionally, the oversupply of batteries is forcing manufacturers to reduce prices to stay competitive. China is producing far more batteries than global electric vehicle (EV) demand can absorb, intensifying the pressure. As a result, the average utilization rate for Chinese battery production facilities dropped from 51% in 2022 to 43% in 2023, with expectations for further declines.

This overcapacity, combined with lower raw material costs and shrinking profit margins, has pushed manufacturers to operate at break-even points just to keep the lines running. However, continuous advancements in technology, automation, and new product launches—especially by industry leaders like CATL and BYD—are helping to keep prices low. These trends suggest that low battery prices will persist for several years as manufacturers continue competing for market share over profit.