BMW will switch to lower-cost batteries for its new EV platform from 2025

German carmaker BMW will switch to the next generation of lower-cost batteries for its new electric-vehicle platform from 2025 as carmakers around the world battle rising prices of raw materials. For its “Neue Klasse" underpinnings, the luxury-car maker will use round cells instead of prismatic ones, following into Tesla's footsteps, who’s been using a cylindrical shape for some time. This change will deliver a 30% drop in costs, Bloomberg reported.

The new round cells will be manufactured by BMW’s existing partners, the report stated. The auto manufacturer currently buys batteries from China’s Contemporary Amperex Technology Co. Ltd. and EVE Energy Co., South Korea’s Samsung SDI Co. and Sweden’s Northvolt AB.

Battery pricing is important for EVs because cells typically make up four-fifths of the price of a battery pack and improve technology and efficiency to typically deliver annual cost reductions. That trajectory has come under strain due to record price rises of key inputs like lithium and nickel, challenging automaker forecasts of soon selling EVs for a similar margin to combustion-engine cars.

Last year, carmakers paid an average of $118 for each kilowatt hour of a pure electric vehicle battery pack, the report cited a BloombergNEF’s 2021 study on lithium-ion battery prices. BMW’s pack costs are already below this level now.

The energy density of the new BMW EV cells will be higher than Tesla’s round cells by at least a low double-digit percentage, which might help BMW to build electric vehicles with a longer driving range than its competitor.

Last year, BMW snatched the global luxury sales crown from Mercedes-Benz but it is cautious about its electric-car strategy which doesn’t have the same cachet as its German rival. Mercedes’ Vision EQXX, a near-production prototype with batteries destined for compact cars from as early as 2024, drove more than 1,000 kilometers this year from Germany to the French Riviera on a single charge, outdoing even Tesla.