BYD and CATL enter EV battery cost war that may allow Tesla to cut prices yet again

The world's two largest EV battery makers - CATL and BYD - are reportedly restructuring their production lines and introducing cost saving technologies and practices with the goal to drop the price of their LFP cells down to $0.04/Wh. This is about half of what EV batteries commanded just a year ago and will give electric vehicle makers many opportunities to slash the price of their cars and stir up demand in 2024.

Perhaps buoyed by such manufacturing cost saving prospects, Tesla entered a new round of Model 3 and Model Y price cuts this week, dropping them up to 9% in important markets like Europe. Other EV makers have also cut their prices, with the Hyundai Ioniq 6, for instance, now becoming cheaper than a Tesla Model 3 Highland in the US.

CATL now holds more than 37% of the battery market, counting Tesla as one of its biggest clients for the LFP cells that are the reason why the Model 3 lost its federal tax credit subsidies in the US. CATL is currently peddling a 173Ah square LFP cell rated for 2C 30-minute charging speeds as its mass market product aimed at sub-$30,000 EVs. Industry insiders have confirmed that "several car companies will switch to this product in mid-2024."

Coincidentally, that is when the Model Y Juniper facelift may be released, too, and it could carry a fast charging LFP battery. This may also be the timeframe within which CATL will be able to halve the LFP cell costs compared to a year ago and it is bound to find many buyers at that price. So far, only CATL can do a fast charging LFP battery at such price, as it is examining its supply chain and manufacturing methods to cut costs anywhere it can.

BYD, however, which just became the world's largest EV maker, is also a vertically integrated company that produces its own batteries, and holds a global market share of about 16%. It won't let CATL's EV battery price war go unanswered and has reportedly started a manufacturing process revision of its own.

"In 2024, we will continue to strengthen the management and control of non-production materials, focus on reducing costs and increasing efficiency," reads a leaked internal memo of its battery subsidiary FinDreams. Where those two battery juggernauts go, others will probably follow, allowing for more EV manufacturing cost and price reductions in 2024.

The battery price war that CATL and BYD have launched is also good for the advent of those elusive sub-$25,000 mass market electric vehicles like the Tesla Model 2 that are reportedly in the pipeline, as they are said to use LFP batteries to stay on the price point. Tesla reports earnings on January 24, when hopefully Elon Musk will be able to spill some more beans on the future growth engine that is affordable electric cars for the masses.

Get the ChargePoint Home Flex Level 2 50A EV charger on Amazon