EV Prices Up? How Falling Battery Costs Could Offset Tariffs
As global economies move towards all-EV vehicles in the coming decades, many experts have worried that inflation and trade competition might put up unnecessary barriers to full EV adoption.
That has been especially true since the United States implemented a series of new tariffs on Chinese products, parts, and materials on July 5, including 100% tariff on full EVs imported from China.
How Tariffs Affect E-Bikes and Scooters
How do these tariffs affect the pricing of personal electric vehicles like escooters and electric bikes? Several manufacturers have announced that they are raising prices to meet the impact of new duties on lithium-ion batteries imported from China, where the majority of EV batteries are currently made.
However, according to analysts at Goldman Sachs, as prices for the raw metals used to build EV batteries – such as lithum, nickel, and cobalt – fall, we should see a corresponding decrease in battery prices, a decrease as much as 40% from 2022 to 2025. (The cost of full-size EV batteries fell by 90% from 2008 to 2023.)
Falling Prices and New Innovations in Energy Density Can Offset Higher Duties
In 2023, Nikhil Bhandari, the co-head of Goldman Sachs’ Asia-Pacific Natural Resources and Clean Energy Research team, forecast prices to fall around 11% per year, which could begin to offset the up to 25% tariffs imposed on EV batteries very soon.
The research team sees electric vehicles in general reaching cost parity with ICE (internal combustion engine) vehicles by 2029. Their research primarily focused on the car and truck market, but these insights apply to the electric batteries used in ebikes and electric scooters as well.
“The reduction in battery costs could lead to more competitive EV pricing, more extensive consumer adoption, and further growth in the total addressable markets for EVs and batteries,” Bhandari writes.
Further cost reductions will also come from constantly evolving EV battery technology that produces safer, lighter, more energy dense batteries with fewer, cheaper materials and less extensive manufacturing.
What’s the takeaway? Tariffs are likely a temporary setback for the U.S. EV market, one that will be remedied in the near future by batteries with higher energy density and lower cost.
There will be temporary price increases, but concerns about higher EV prices and about tariffs making ebikes and scooters unaffordable should be tempered by a realistic outlook on the dynamism and strength of the EV market as a whole.
