EV Battery Prices are Dropping, But Maybe Not Fast Enough

By · August 16, 2012

Nissan LEAF battery pack

The Nissan LEAF's battery pack: How cheap does it need to be? (Nissan photo)

A new study by McKinsey & Company’s consultants sees dramatic drops ahead for lithium-ion battery packs, from $500 to $600 (some say $800) per kilowatt-hour today to $200 per kilowatt-hour by 2020, and $160 per kWh by 2025.

“In the U.S.,” the study says, “with gasoline prices at or above $3.50 a gallon, automakers that acquire batteries at prices below $250 per kWh could offer electrified vehicles competitively, on a total-cost-of-ownership basis, with vehicles powered by advanced internal-combustion engines.”
There are a number of other studies that say the same thing, and we’ll look at them in a moment, but the question before us here is whether we can wait until 2020 for that kind of breakthrough. And could such price drops actually occur sooner?

Faster Pace Needed

There’s a sense of urgency to get battery prices down. We’ve already lost Aptera and Bright, and any number of other start-ups face an uphill climb to profitability. The public hasn’t rushed to buy $30,000 EVs. At the Clean Energy Summit last week, Elon Musk, CEO of Tesla, said, “The challenge Tesla faces over the next several months, which is a very difficult one, is to scale up production and achieve enough of a gross margin on the product that we get to a situation where we're cash-flow positive. If we aren’t able to do that we will join the graveyard of all the other car company startups of the last 90 years.”

Musk has noted elsewhere that he was stupefied by the burn rates of automotive start-ups. Make that double when the cars are battery powered, and the packs retail for $15,000 to $20,000. A 2010 MIT report said that 80 percent of the drive system cost in a plug-in hybrid is the batteries (the electric motor, inverter and power control unit are fairly affordable). And Tesla is actually in a very good position compared to most of its competition, including Fisker, Coda and Wheego.

The Chinese Connection

The McKinsey report said that “lower components prices” would account for 25 percent of the price drop, with more cuts coming from moving production to the most cost-effective locations (ie, China). The latter point is interesting, in light of the political uproar over the projected Chinese investment in American (and federally subsidized) A123 Systems. The Obama Administration’s $2.4 billion advanced battery program was aimed at locating as much battery production as possible in the U.S. In the case of A123, however, it’s had the effect of persuading the company to expand production capacity in Michigan before the automakers were ready.

It's possible that price drops will happen through technical innovation, and that's why a lot of people are focused on the claims being made by Envia Systems, which says it has achieved energy density of 400 watt-hours per kilogram (and has some fairly authoritative test results confirming it), and talks of $20,000 electric cars with 300-mile range. Dan Akerson, CEO of General Motors, whose investment arm put $7 million into Envia, said last week that the company could be ("50-50") on track for an affordable 200-mile-range car.

Some predictions put the cost reductions ahead of 2020. The U.S. Advanced Battery Consortium (USABC) is aiming for $400 a kilowatt-hour by 2015 and $150 per kWh by 2020, but it’s been overly optimistic in the past. Lux Research thinks that li-ion battery costs could come down 45 percent by 2022, roughly analogous to a five percent improvement per year.

And here’s an optimistic note: Bloomberg New Energy Finance says in its quarterly Electric Vehicle Battery Price Index that the average li-ion battery cost $689 per kilowatt-hour in the first quarter of 2012, down 14 percent from $800 a year ago and down 30 percent from $1,000-plus in 2009. By 2030, Bloomberg indeed sees the magic $150 per kilowatt hour (in 2012 dollars).

A Cleaner Grid

Beyond price, a new Union of Concerned Scientists (UCS) “State of Charge” study reports an EV advantage I’ve long cited—the longer you own it, the cleaner it becomes. Because the feds and new tech are cleaning up the grid, “By 2025, for 70 percent of Americans, charging their electric vehicle (EV) on the regional electricity grid would result in lower global warming emissions than even today’s most efficient gasoline hybrid, the 50 miles per gallon (mpg) Prius, up from 45 percent today,” UCS said.

We all know that EVs have many virtues, but that will be academic if they can't be priced for affordability by the average American car buyer. People want to do the right thing, but they can't break the bank in the process.

Comments

· · 2 years ago

It's an interesting quote about how low battery prices have to fall for OEMs to offer EVs at a competitive total cost of ownership. By my calculations, they already do! Let's assume you are buying a new car anyway, you get the full Federal credit, and you'll drive 15,000 miles/yr in a car that averages 25mpg (and gas is $3.50/gal.) Over five years, you'll be ahead with an EV. Total cost of ownership is lower with the EV. If you get your electricity from solar or wind you already have installed, you're WAY ahead! People just need to do the math.

· · 2 years ago

Sorry.. couple more data points. The above assumes you'd pay $25,000 for an ICE and you pay $39,000 for the EV (before credit.) Hell, why even call it a premium? Plenty of people pay ~$32k for a car. You'd just be choosing electric power as your option package rather than leather, power seats, etc.

· Bret (not verified) · 2 years ago

Improving the energy density is a big factor in reducing the cost, which is why the Envia battery is so attractive. If Envia really can produce this battery in three years at the weight, cost and energy density they claim, a lot of these analysts are going to look pretty foolish for predicting 8% annual cost reductions.

· Anonymous (not verified) · 2 years ago

These studies are useless because they calculate and predict up to 2020 and 2025 but do not take account of the hydrogen fuelcell cars and suvs that are scheduled for 2015 like major manufacturers said.

· Al Blunt (not verified) · 2 years ago

I agree, Patricio Ev as I dipped my toes just this summer searching for a fuel efficiency car most were already well into the $20,s. And I stopped by a Chevy dealer on my way to work and they had I believe it's called the Aveo and it was a 2 door and it looked like it was just a little bigger than the smart car and it was around 15,000.
I also believe battery prices will come down sooner. As in the r.c. Hobby field lipo battery prices dropped pretty quickly. And yes I know there's no comparison but we were paying about $100. For a 3 cell pack less than 5 years ago now you can get comparable 3 cells for less than $20. Etc... So I believe they will because more Asian battery manufactures will get on board

· · 2 years ago

@PatricioEV, I recently read an article that put the Focus Electric at only $7500 premium over a comparably equipped Focus gas including the $7500 tax rebate. (the nice thing about the Fords is that all of their vehicles have a direct gas model you can compare it to) With this premium, I calculate somewhere between 6 and 8 year payback depending on if you include the home charging station (I included not just gas but also a $30 oil change every 7500 miles and assumed $3.50/gal, 33 mpg combined, and $0.10/kWh). I consider this pretty good for 2012 and will only get better.

As far as the battery “pack” costs, it all depends on what is included. Not all battery packs are the same. Do they include an integrated charger? Integrated control module? Air or water cooled? Integrated water pumps (if water cooled)? 6.6 or 3.3 kW charger (if integrated charger)? How complex is the temperature or current sensors system? Is the battery in one piece (Leaf), 2 pieces (like the Focus) or complex geometry (like the T pack in the Volt)? Is the battery enclosure structural or not? Integrated DC/DC? Voltage boosters or regulators? What size is the pack (a large pack will have a lower $/kWh because of a lower ratio of cost of the battery cells to supporting components). The list goes on.

What needs to be discussed is the cost of the actual cells per kWh. I would argue that all of the manufactures are probably paying about the same $/kWh of cells today (probably around $400). Take the Focus which is said to be $12000-$15000. At $400 $/kWh x 23 kWh = $9200. Add in the enclosure, controller, supporting water cooling system, contactors, charger (don’t know if this is integrated???), etc. and it will easily be over $12000. The difference is the design, what is included in the pack, and manufacturing volume. And, whatever isn’t included in the pack (e.g. the controller or charger), it still is included in the total battery system and therefore, the vehicle total cost.

@Anonymous (not verified), Can you get me some of that stuff you are smokin. Sounds like some gooooooood s#!t.

· · 2 years ago

The market will take care of itself. Cant force people to buy what they dont want. Specially if it only gets a few miles per charge. Big boats take longer to turn.

· · 2 years ago

"Can you get me some of that stuff you are smokin. Sounds like some gooooooood s#!t."

I'm guessing he scores it from gorr, regman. The only thing I know that can gently bring one down from a hydrogen overdose is a little good old-fashioned lithium . . .

http://en.wikipedia.org/wiki/Lithium_pharmacology

:-0

Incidentally, the last article link in Jim's article takes you to the Union Of Concerned Scientists site, where one can download the studies in PDF form . . .

http://www.ucsusa.org/clean_vehicles/smart-transportation-solutions/adva...

This is marvelous, clearly written and well researched EV info. I plan to have some of it printed out and available for distribution on National Plug In Day (NPID) on September 23rd.

Yeah, we might as well start talking about NPID. It's now just a little more than a month away. I'll have a dedicated Tucson page authored on the Plug In America site very soon . . .

http://events.pluginday.org/p/salsa/event/common/public/index.sjs?distri...

In the mean time, this one gives a preview of what we'll be doing in Tucson on that day . . .

http://tucsonplugsin.blogspot.com/

If you want to have some fun with the above page, click a language to translate. I think it looks particularly good in Macedonian . . . especially while on hydrogen!

· Jerry Peavy (not verified) · 2 years ago

Well if we could quit shooting ourselves in the foot perhaps the Aptera could have survived in the U.S., as it is it will now be produced by Zhejiang Jonway Group of China! At least it will be assembled in America. If all goes well you can see one in person in Santa Rosa Ca. in 2013!

· Brian Keez (not verified) · 2 years ago

Nissan will soon be the largest large li-ion battery producer in the U.S. If they are smart, the batteries will be marketed as stationary power storage to help reduce peak demand charges. After the value in stationary storage is realized, the demand for that market will help to reduce battery cost tremendously.

· smithjim1961 (not verified) · 2 years ago

@Brian Keez

Perhaps you or someone else can explain something to me. People talk about lithium ion batteries being used as stationary storage. The real advantage of lithium ion batteries is energy density which is very important when it comes to EVs but there is no weight penalty for stationary storage. It seems to me that lead-acid, which is the lowest cost type of electrical energy storage, would be best suited for stationary storage.

· · 2 years ago

@smithjim1961,

I think the main advantage is not in using new Li batteries, but rather end-of-EV-life batteries. At this point, their energy density has decreased significantly, but they still have some useful life left. Compare buying a spend Li battery from a 10-year-old Leaf against buying a new Pb battery, and it could very well be price competitive.

· · 2 years ago

@Brian Schwerdt

Those batteries will be much more likely recycled then sold.
Personally, I'd much rather go with Lifepo batteries as energy storage, much safer and longer lifespan, plus I would assemble them from cells and change dead cells over time.

· Drubie87 (not verified) · 2 years ago

"With gasoline prices at or above $3.50 a gallon, automakers that acquire batteries at prices below $250 per kWh could offer electrified vehicles competitively."

Yeah, who really thinks that gasoline prices are going to stay at $3.50 a gallon over the next 10 years? Gasoline usually goes up at least as fast as inflation. While battery costs are getting 8 percent more dense for the same cost each year (compounded).

And how can they say "at or above $3.50 a gallon" as if gas being $5.50, $4.50 or $3.50 will be the same to the general consumer. Using basic logic would show that as gas prices go higher consumers start paying more up front for better fuel economy (including electric cars).

Plus this doesn't take into account global markets. In countries like Germany, Canada, and England, they are already paying $6 to $8 a gallon for gas. What will they be paying in 2015 or 2020? So really? Whether we are paying $8 or $3.50 a gallon for gas makes no difference, unless batteries for electric cars cost $250 a KWh (or less) electric cars just cannot be sold competively? Does not make sense to me.

· Drubie87 (not verified) · 2 years ago

"With gasoline prices at or above $3.50 a gallon, automakers that acquire batteries at prices below $250 per kWh could offer electrified vehicles competitively."

Yeah, who really thinks that gasoline prices are going to stay at $3.50 a gallon over the next 10 years? Gasoline usually goes up at least as fast as inflation. While battery costs are getting 8 percent more dense for the same cost each year (compounded).

And how can they say "at or above $3.50 a gallon" as if gas being $5.50, $4.50 or $3.50 will be the same to the general consumer. Using basic logic would show that as gas prices go higher consumers start paying more up front for better fuel economy (including electric cars).

Plus this doesn't take into account global markets. In countries like Germany, Canada, and England, they are already paying $6 to $8 a gallon for gas. What will they be paying in 2015 or 2020? So really? Whether we are paying $8 or $3.50 a gallon for gas makes no difference, unless batteries for electric cars cost $250 a KWh (or less) electric cars just cannot be sold competively? Does not make sense to me.

· · 2 years ago

Hm... I was looking at the Toyota Camry sedan the other day (not the hybrid, the regular one every family seems to have one of). Can someone tell me the payback time for choosing the more expensive V6 engine over the cheaper 4-cylinder engine? My calculations must be wrong, I seem to get negative numbers all the time!

· Sal Odore (not verified) · 2 years ago

So weather you are an environmentally thinking person, or business thinking person or both, considering solar or wind power is simply a plain smart concept.

· · 2 years ago

@Sal Odore
http://nlcpr.com/Deceptions6.php

· · 2 years ago

Yeah, there are going be scam artists out there in just about everything. Solar and wind is relatively new to the general public and we're going to see all sorts of fly-by-night artists popping up to make extraordinary claims about what these technologies will do. It's a shame, since it will also give a bad name to the many legitimate and honest manufacturers and installers in the industry.

Click Sal's profile, Teq. It takes you a New York Times web page! Hmmm . . .

Actually, if you want to make your own PV panels, you can purchase raw components from legitimate suppliers. It can be a great educational tool - especially for a young person wanting to learn more - but few will admit, when factoring in your time and labor, that it's going to be much of a money saver. If anything, it's probably going to be more expensive in the end to "roll your own."

Much the same can be said about electric car DYI projects: hard work and careful research can yield impressive and rewarding results. But your going to be your own warranty repair department when things won't work or they break. In terms of investment in parts and tools, you typically get what you pay for.

· · 2 years ago

Good thing we EV nerds are mostly educated and can figure out a scam :)
I think the only feasible power generator made by hand is water mill

· Spec (not verified) · 2 years ago

Installing your own solar system from purchased components is a way to get an inexpensive solar system. The components for a decent system can cost less than $10K these days. If you can wire a subpanel, you can install your own PV system. It is not rocket science but don't do it unless you are comfortable with basic electrician work.

· · 2 years ago

That's true, Spec. But I'm guessing that you're referring to taking pre-manufactured panels and connecting them in a larger array, with all the attendant controllers and inverters. This is a good way to go about it, if you've got the technical know how.

What was being proposed on that fly-by-night site, though, was to purportedly save money by buying the individual solar cells and soldering all of them together to form a single panel. Think 50 or more cells per single 200W panel . . . and, one assumes, doing all that for multiple 200W panels. It's a neat science project to make a single 15W panels from a handful cells, so you can charge your iPhone. It's another thing entirely different to have to do that for a 6kW rooftop array.

Furthermore, the scam site gives totally unrealistic promises as to what solar will do. We still find folks on blogs and forums like this one who think that a panel large enough to be built into the rooftop of a typically EV is large and powerful enough to actually recharge the vehicle's batteries while you're shopping for groceries. Solar is good, but it's not THAT good!

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