Lithium-Ion Cell Prices Poised for Big Plunge

By · November 04, 2013

Tesla Model S

The Model S, this one snapped in upscale Westport, Connecticut last week, is becoming dominant in America's wealthiest zipcodes. (Jim Motavalli photo)

It’s nice to hear optimism in the electric car space. While it’s hardly likely that President Obama’s dream of a million EVs on the road by 2015 will be realized, low lithium-ion battery prices by then (and even lower ones by 2020) will spur a growth spurt in the plug-in market, said Sam Jaffe, a senior research analyst at Navigant Research.

Jaffe is leading a Navigant webinar on “The Lithium-Ion Inflection Point” Tuesday afternoon. Global demand, the company said, “is set to explode.” While the word choice might not be ideal following the two Tesla fires, it’s evocative anyway. The main reasons? Improvements in the cost of the chemistry, energy density, performance and safety, plus big economies of scale.

How About $180 per KwH?

Jaffe said Monday he expects to see large-format lithium-ion cell prices drop from $500 a kilowatt hour now to $300 by 2015 and a dramatically low $180 by 2020. “I feel very confident about those number,” he said. “They’re the result of a lot of back and forth with manufacturers, and they say the reason they picked li-ion in the first place is that it had the potential to reach those kinds of numbers. The price drops have already started—we’re seeing costs come down for many of the components of the battery, including the metal, wiring and plastic.”

Battery Markets

Battery markets will grow internationally, Navigant said. (Navigant Research graphic)

Yes, there are other technologies out there, including high-density solid-state batteries from company’s like Michigan’s Sakti3. But according to Jaffe, “Solid electrolyte chemistry is very interesting, but it’s in the early research stages—nobody’s on the brink of bringing it to production. We expect li-ion to be with us through 2020, and probably much longer.”

Game-Changing Cheap Batteries

One reason price plunges will start to accelerate, Jaffe said, is that newer large-format li-ion batteries use very small or no amount of high-priced cobalt in their chemistry.

Cheap batteries are a game changer for the auto industry, and Navigant sees big market leaps—from half a percent of U.S. sales today to three to five percent by 2020. “Right now, a Chevy Volt still doesn’t make sense for many buyers when you can get a comparable gas car for $10,000 less,” he said. “But when there’s a $2,000 to $4,000 difference, which is what we expect by 202, then its’ not quite a no-brainer to buy the electric, but it’s hard not to.”

A Big Market, Even at 3 Percent

Is a three to five percent market share reason to cheer? Jaffe thinks so. “If you look at other new vehicle types, like the hybrid in the late 90s or the SUV in the late 80s, they were in a similar position. It takes time for a new type of vehicle to get traction in the car market. And three percent of the auto market is a huge business in and of itself.”

That’s true. Even with Tesla’s numbers now, the industry is getting interested. Especially since the Model S is outselling many other luxury leaders, and has become the top-selling car in some very impressive zip codes.

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