South Africa’s tardiness in building a gigafactory to produce storage batteries for the automotive and renewable energy sectors may prove to be a blessing in disguise. A growing number of competitive technologies for lithium-ion (Li-ion) batteries are being developed – and there is no clear indication which one will prevail or what the mix will look like.
An important consideration for potential investors is the return on investment. BloombergNEF (BNEF) reports that battery prices saw their biggest annual drop in 2014 since 2017. Li-ion battery pack prices dropped 20% from 2023 to a record low of US$115 (R2 139) per kilowatt-hour as a global average.
Several factors have contributed to this decline including cell manufacturing overcapacity, economies of scale, lower metal and component prices, a slowdown in the sale of electric vehicles and a switch to lower-cost lithium-iron-phosphate (LiFePO4) batteries. This figure represents a global average with prices varying widely across different countries and applications.
BNEF reports current oversupply of Li-ion batteries exceeded annual demand by more than 2,5 times in 2024. As a result, pack prices are expected to drop by US$3 (R560 per kilowatt-hour in 2025.
This puts the squeeze on gigafactory operators, which have massive investments to recoup. A Tesla gigafactory in Mexico will cost around US$10 billion (R186 billion) while Morocco has signed a U$6,4 billion (R119 billion) deal with Chinese battery manufacturer Gotion High-Tech Company to build a similar facility.
In South Africa, Afrivolt (formerly Aqora) has announced plans to conduct a feasibility study for the country’s first gigafactory. However, there will be increased pressure on first-generation plants manufacturing Li-ion batteries.
LiFePO4 batteries are more cost-effective than other options and offer favourable safety and lifespan characteristics, says Mika Takahashi, Technology Analyst at IDTechEx. Importantly, they reduce dependence on cobalt and nickel – critical materials subject to
price volatility and supply chain uncertainties among major producers such as the Democratic Republic of the Congo.
In response to geopolitical pressures, Western nations are actively seeking to lessen their reliance on China’s supply of key battery materials including cobalt, lithium, graphite, manganese and nickel.
Beyond Li-ion batteries, various alternative technologies are emerging such as sodium-ion, potassium-ion, magnesium-ion, calcium-ion, lithium-sulphur, iron-air, zinc-ion, graphene, solid-state, viologen redox and vanadium redox batteries. Some of these are better suited to stationary energy storage while others cater to the automotive industry.
Hydrogen technology is also gaining momentum as a potential competitor to battery-electric vehicles, particularly in commercial transport, shipping and rail applications.
Ultimately, global regulation aimed at reducing or reversing the rate of climate change is driving the market.
“One thing we’re watching is how new tariffs on finished battery products may lead to distortionary pricing dynamics and slow end-product demand. Regardless, higher adoption of LiFePO4 chemistries, continued market competition, improvements in technology, material processing and manufacturing will exert downward pressure on battery prices,” says Yayoi Sekine, Head of Energy Storage at BNEF.
