The future of electric vehicle (EV) growth hinges on making them more affordable to buy and maintain. While environmental concerns are important, most Americans are unlikely to abandon their gas-powered cars solely for climate reasons. The key to widespread EV adoption lies in reducing battery costs, and recent research from Goldman Sachs offers promising news in this regard.

According to the report, lithium-ion battery prices are expected to continue declining significantly in the coming years. By 2026, global average battery pack prices could fall to $82 per kilowatt-hour (kWh)—a sharp drop from the 2023 average of $149/kWh. This 26% price reduction from current levels is part of a broader trend, as battery prices were as high as $780/kWh just a decade ago, in 2013.

These price drops are pivotal. At the projected 2026 price point, electric vehicles (EVs) would achieve cost parity with gasoline-powered cars in the U.S., even without government subsidies. Currently, the higher upfront cost of EVs is balanced somewhat by lower fueling and maintenance costs, but the average new electric car is still significantly more expensive than its gas counterpart.

While newer models, like the $35,000 Chevy Equinox EV with a range of over 300 miles, are making EVs more accessible, the industry still faces challenges. Traditional car manufacturers are struggling to turn a profit on EVs due to high battery costs and low production volumes. Government incentives, such as the $7,500 EV tax credit, help ease the burden for both consumers and automakers, but they aren’t a long-term solution. To see real growth, buying an EV must become an obvious economic choice for consumers.

Goldman Sachs’ researchers believe that 2026 will be a turning point for EV demand. Nikhil Bhandari, co-head of the bank’s Asia-Pacific Natural Resources and Clean Energy Research, notes that the decline in battery costs will make EV ownership more appealing purely from an economic standpoint. With the high prices of new cars and rising interest rates, many consumers are hesitant to invest in an unfamiliar and expensive technology, which has contributed to the current slowdown in EV demand growth.

There are two key factors driving the faster-than-expected decline in battery prices: technological advancements and falling costs of key battery materials like lithium and cobalt. Recent innovations have allowed manufacturers to produce batteries that store more energy at a lower cost, while the costs of battery metals have also dropped. Supply chain disruptions and high demand in recent years caused prices to spike, but as mining and processing capacity expands, those costs are stabilizing.

Looking ahead, Goldman Sachs expects battery pack prices to continue declining through 2030, with the global average potentially reaching $64/kWh by the end of the decade. This steady drop will benefit both manufacturers and consumers, making EVs an increasingly attractive option and accelerating the transition away from traditional gasoline-powered vehicles.

By Impact Lab