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.

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