McKinsey: Lithium Ion Battery Prices to Reach $200 Per kWh by 2020

By · July 16, 2012

Leaf battery

A recent study suggests that the price for a "complete automotive lithium-ion battery pack" will dramatically fall prior to the end of the decade.

According to a recent McKinsey study, the price of automotive-grade lithium-ion batteries is on a path of steady decline.

As the McKinsey study forecasts, the price for a "complete automotive lithium-ion battery pack" should fall from the current cost of approximately $600 per kilowatt hour to roughly $200 per kWh by 2020—and dip even further to $160 per kWh by 2025.

I've been tracking lithium ion prices for some time, and it appears that some kind of consensus is forming. Alan Mulually, Ford's CEO earlier this year pegged the lithium battery cost in the Focus Electric at between about $520 and $650 per kilowatt hour. Pike Research’s estimate from late 2011 for a finished and installed EV battery pack placed the cost at $752 per kilowatt-hour—but by this year it would fall by 5 percent, and drop 10 percent more by 2013. Bloomberg New Energy Finance indicated that the current price is $689 per kWh. So, the McKinsey number for today's pack is another indication that $600 is in the right range.

Using $600 per kWh, the LEAF's 24-kWh battery pack would cost Nissan $14,400. But at McKinsey's predicted $160 rate in 2025, that same pack would cost Nissan only $3,840, a dramatic reduction of $10,560.

The study suggests that the vast majority of the cost reductions will come from improvements in manufacturing processes, standardization of equipment and high production volumes. Furthermore, the study predicts that most of the cost-cutting measures will be in place by 2015. Pike had forecast cost reductions of about 10 percent a year in the next three years.

Comments

· · 2 years ago

$10.5k less for a Leaf's battery? That's excellent news! Even when the tax credit expires, that's a reduction of $3k to the consumer (assuming of course Nissan spreads the good news).

· Drew (not verified) · 2 years ago

I expect that when/if my Leaf's batteries do need replaced, I'll be happy to replace them because they'll give me more range and faster charging at an affordable price. I think cars will become like computers, where you upgrade components every few years. There are certainly people who laugh at my purchase and say I'll be spending $15k in six-eight years for new batteries, but I can't say I agree with them.

· Bill Howland (not verified) · 2 years ago

Great News.
I want my next car to be a Cadillac Escallade Electric with 600 mile range. With a 200 kwh battery of course to give it the 600 mile range. I don't care that it will take 30 hours to charge it with my current charging dock. I only go on 600 mile trips every once in a while.

· · 2 years ago

@Bill Howland,

Do you care that even at $160/kWh, that battery alone would cost $32k? Maybe for a Cadillac, that's acceptable?

@Drew,
I agree that we need more fast charging options. Also, for anyone who laughs at spending $15k in eight years for what amounts to a like-new car, point out that getting a like-new ICE car will cost much more than that...

· · 2 years ago

One interesting indication is coming from the cost expressed as 40 $/EV range mile. That means a cost of 20000 $ for a 500 miles range, but only 3000 $ for 75 miles. This is noteworthy because 3000 $ is about the cost of a standard engine. In return it means that 75 miles EV battery would come at roughly the same price as a standard car engine of today. If you take into account the elimination of costs associated with clutch, gearbox, starter and the likes that are typical for a classic car, you can consider that the addition of a motor, controller and range extender costs would be roughly compensated. Thus, this means a true equivalence in production cost between a range extender EV with 75 EV miles and a present day standard car, which is exactly what is required for mass production. There doesn’t seem to be any doubt left to what will be the future mass production car. This cost parity with present day standard gas cars tells it all.

· TheCarGuy4all (not verified) · 2 years ago

I don't see any information regarding the continued mining and availability of Lithium. Lithium is a rare earth metal and companies are now looking towards offshore mining to find new deposits. Even if the technology is refined, and IF some of the Lithium can be saved by recycling, there is a huge pothole in this logic. To drop in price the technology has to advance and the minerals that create that technology can't be finite. Also, there is word from China that they plan to limit the amount of total export of their Lithium-ion constructed batteries and will hold them for private consumption.
So, I'm calling optimistic shenanigans on this particular issue. Not that you have any idea who I am of course.

· TheCarGuy4all (not verified) · 2 years ago

I don't see any information regarding the continued mining and availability of Lithium. Lithium is a rare earth metal and companies are now looking towards offshore mining to find new deposits. Even if the technology is refined, and IF some of the Lithium can be saved by recycling, there is a huge pothole in this logic. To drop in price the technology has to advance and the minerals that create that technology can't be finite. Also, there is word from China that they plan to limit the amount of total export of their Lithium-ion constructed batteries and will hold them for private consumption.
So, I'm calling optimistic shenanigans on this particular issue. Not that you have any idea who I am of course.

· · 2 years ago

@TheCarGuy4all - Lithium is not a rare earth metal. Granted it isn't as ubiquitous as Zinc or Nickel, but the US has 17% of worldwide deposits. Also, about half of worldwide deposits are in South America (spread among Chile, Argentina, and Bolivia each having very big reserves ... Chile has the largest reserve with only a little more than the US). 85% of lithium reserves are NOT in China.

See: http://www.lithiumalliance.org/about-lithium/lithium-sources/85-broad-ba...

Of course, your point is that we really don't know what will happen to lithium prices and there is some risk that it could become the "oil" of the future. But, I guess not, for three reasons:

1.- Lithium is recyclable - it degrades over time, but doesn't really go away like burning something does.

2.- Electric cars will take a VERY long time to "fuel" personal transportation like gasoline has, if at all. More likely is some mix of hybrids, ICEs, and electrics.

3.- There are other battery technologies that could replace lithium if the price is too high for lack of supply.

I'm not too confident of the last one (we always hear of wonderful technologies coming along 5-10 years from now [like 20 years ago we've heard these stories] without fruition), but even if we have to go back to NiMH batteries that are heavier and less energy dense, there is precendent (the Toyota Rav4EV that has proven it can get 100,000 miles on a pack) that other options are possible.

And if you think China would hold it's batteries for its own consumption (like they tried doing with rare earths a year or two ago), I think they can't afford it. They need the exports as much as we need the imports ... in fact they probably need them more. So, if they pulled some kind of crap like that - like what happened with the rare earths - there will be global pressure against them to reverse course. Besides, with lithium, as opposed to rare earths, there is much more supply outside of China to compete.

· · 2 years ago

Good points, Dan. One of the more interesting books regarding lithium batteries, Bottled Lightning by Set Fletcher, has a couple chapters devoted to the lithium supply chain. Most of that U.S lithium, apparently, is in northern Nevada. There's lots of it and it is easy to get to. This book also describe the rise and ultimate debunking of a "Peak Lithium" urban legend advanced by William Tahil about 6 years ago.

· Curran (not verified) · 2 years ago

@TheCarGuy4all
I think all the worry about a shortage in lithium is misplaced. Yes, the supply of land based lithium might be a limiting factor, except for the amount of lithium dissolved in the world's oceans. From my calculations, based upon average concentrations, and a world population of 7 billion, there is about 362,000 lbs of lithium per person dissolved in the ocean. Yes, its dilute, but if demand goes up, someone will figure out a way to economically extract it out of the ocean. The only problem I can see is that if an average person needs more than 180 tons of lithium.

· Dan2 (not verified) · 1 year ago

@Curran
"The only problem I can see is that if an average person needs more than 180 tons of lithium."

I suppose if they were depressed enough, they could ;~)

@Dan
"1.- Lithium is recyclable - it degrades over time, but doesn't really go away like burning something does."

Just to clarify - Lithium BATTERIES degrade over time but lithium itself never degrades. Lithium is an element just as hydrogen, iron, and sulfur are elements and never degrade.

@TheCarGuy4all
"...IF some of the Lithium can be saved by recycling..."

A very LARGE percentage of the lithium WILL be saved by recycling - just like the very large percentage of lead that has been saved for decades by recycling lead-acid car batteries.

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