The decline in metal prices for batteries: a double-edged sword effect for the electric vehicle industry

In 2025, the global electric vehicle industry is experiencing an industrial shake-up triggered by a sharp drop in battery metal prices. The prices of key raw materials such as lithium, cobalt, and nickel have continued to decline. The price of lithium carbonate has dropped from a peak of 590,000 yuan per ton in 2022 to less than 100,000 yuan currently, a decline of over 80%; the price of cobalt has plummeted by 60% within three years, and the price of nickel has also fallen by 50%. This price storm seems to bring cost benefits to the electric vehicle industry, but it actually conceals deep-seated contradictions in the industrial chain restructuring.

I. Cost Benefits Spark Price Wars and Technological Leaps

The sharp drop in metal prices has directly led to a significant reduction in the cost of power batteries. Goldman Sachs predicts that the global average battery price will drop to $80 per kilowatt-hour by 2026, a decrease of nearly 50% compared to 2023. Leading companies such as CATL and BYD have reduced the price of lithium iron phosphate battery cells to below 0.3 yuan per watt-hour, making pure electric vehicles in the 100,000 to 200,000 yuan price range competitive with their fuel counterparts. Cao Li, vice president of Leap Motor, revealed that the purchase price of lithium iron phosphate battery cells is expected to break through 0.32 yuan per watt-hour within the year, meaning that the cost of a 60 kWh battery pack will be reduced by more than 20,000 yuan compared to the peak in 2022.

The cost reduction provides space for technological innovation. BYD achieved a 15% reduction in battery cell costs in 2023 by optimizing its procurement system. CATL's 173Ah VDA specification lithium iron phosphate battery cell maintains a 2.2C fast charging performance while increasing energy density by 10% compared to the previous generation. This dual drive of "cost reduction and efficiency improvement" is accelerating the breakthrough of electric vehicles towards a technical threshold of 800km range and 15-minute fast charging.

II. Structural Crisis in the Context of Industrial Chain Imbalance

The sharp drop in metal prices has exposed deep-seated contradictions in the industrial chain. The explosive growth of nickel production capacity in Indonesia has led to a global oversupply of nickel, forcing the closure of BHP Nickel West's factory due to losses. Chinese cobalt producers have ignored price signals and continued to increase production, with output in the first three quarters of 2024 surging by 25% year-on-year, exacerbating market imbalance. This "prisoner's dilemma" has plunged upstream mining companies into a loss-making quagmire. The share price of Australian lithium miner Pilbara Minerals has plummeted by 90% in three years, and the default rate of Indonesian nickel mining companies has risen.

Midstream battery enterprises are facing a cliff-like decline in capacity utilization. In 2023, the capacity utilization rate of China's power batteries dropped sharply from 75% to 65%. Giants like CATL and BYD have engaged in price wars to clear inventory, with the average price of lithium iron phosphate battery cells halving compared to the same period last year. This vicious competition has pushed the industry's gross margin below the 10% red line, severely squeezing the survival space of second-tier battery manufacturers.

III. Dual Variables of Geopolitics and Industrial Restructuring

The US trade policy has become the greatest uncertainty factor. The Trump administration's plan to impose tariffs on imported Chinese battery metals may force the global battery supply chain to split into two major systems, one for China and the other for the US. According to CRU Group data, China accounts for 65%, 80%, and 70% of the global refined capacity of lithium, cobalt, and nickel respectively. Such industrial concentration means that any trade barriers will trigger supply chain reorganization.

Technological route changes are reshaping the industrial landscape. Lithium iron phosphate batteries, with their cost advantages, have broken through a 60% market share in the energy storage sector. The demand for energy storage batteries is expected to surge by 51% in 2024, creating a substitution effect on ternary batteries. The breakthrough in sodium-ion battery technology has introduced a new variable. The energy density of CATL's second-generation sodium battery has reached 160Wh/kg, with a cycle life exceeding 5,000 times, demonstrating substitution potential in A00-class vehicles and the energy storage market.

IV. Deep Challenges from a Sustainable Development Perspective

The sharp drop in metal prices threatens the long-term security of the industry. The International Energy Agency warns that the current lithium price is approaching the production cost line, with 50% of global lithium mining projects in a loss-making state, which may lead to a 150,000-ton lithium supply gap by 2030. The cobalt and nickel markets also face the risk of capacity withdrawal. The output from artisanal mining in the Democratic Republic of the Congo still accounts for over 20%, with ESG risks continuously accumulating.

The battery recycling system is the key to breaking the deadlock. In 2023, only 30% of China's retired power batteries were recycled, with a large number of retired batteries flowing into informal channels. However, technological breakthroughs bring hope. Zijin Mining's manganese-titanium adsorption lithium extraction technology has reduced the cost of salt lake lithium extraction by 40%; Jinyuan Co., Ltd.'s electrochemical intercalation and deintercalation technology enables direct lithium extraction from raw brine, with a recovery rate exceeding 85%. By 2030, battery recycling is expected to meet 25% of global lithium demand, becoming a core support for stabilizing the supply chain.

The sharp drop in battery metal prices is like a double-edged sword. It not only accelerates the popularization of electric vehicles but also exposes the vulnerability of the industrial chain. The industry needs to establish a dynamic balance mechanism: reducing metal dependency through technological iteration, accelerating the research and development of alternative technologies such as sodium batteries; improving global supply chain governance to avoid market fragmentation due to geopolitics; and building a closed-loop recycling system to transform retired batteries into "urban mines".