Tesla Is Approaching The Anticipated Magic Battery Cost Number

Tesla battery production

JUN 28 2018 BY EVANNEX 57

TESLA IS GETTING CLOSE TO THE MAGIC BATTERY COST NUMBER THAT WILL TURBOCHARGE DEMAND

Electric vehicle sales are climbing steadily – for almost two years now, each month’s sales have been greater than those of the previous year. The market for lithium-ion batteries, which is also driven by the increasing demand for utility-scale stationary storage, is growing at a far more impressive rate. According to Orbis Research, the global battery market is expected to expand from around $30 billion in 2017 to $139 billion by 2026. Goldman Sachs predicts battery demand will grow at an annual rate of 32% through 2025.

*This article comes to us courtesy of EVANNEX (which also makes aftermarket Tesla accessories). Authored by Charles Morris. The opinions expressed in these articles are not necessarily our own at InsideEVs.

Above: Tesla’s Model S (Image: Tesla)

Sounds like an enticing business opportunity, right? It’s just the beginning. As of the end of 2017, EVs accounted for around 1% of the global automobile market – the potential for growth is huge. However, EVs are still considerably more expensive than legacy vehicles, thanks to high battery costs. The average price of a Li-ion battery pack has fallen 70% since 2010, but it still stands at $209/kilowatt-hour, according to Bloomberg New Energy Finance (Tesla’s battery pack prices are believed to be around $150/kWh). Most battery boffins agree that the “magic number” that will allow automakers to sell EVs at prices comparable to fossil-fueled cars without subsidies is around $100/kWh.

Here’s where things get interesting: it appears that Tesla is getting very close to that tipping point. At the company’s recent shareholder meeting, CTO JB Straubel, as always, was cagey about battery costs, as Electrek reported. “It’s difficult for us to talk about specific cost numbers,” said Straubel, “but we are still very confident that we have the best price and performance of anything out there in the world. If there’s anything better, I don’t know about it, and we have looked as hard as we possibly can. We try to talk with every single battery startup, every lab, every large manufacturer. We get quotes from them. We test cells from them. If there’s anything better, we are all ears, we want to find it, but we haven’t found it yet.”

Above: Falling battery costs continue to bring electric cars closer to price parity with internal combustion engine gas-powered cars (Source: Bloomberg)

An ebullient Elon Musk was a bit more forthcoming, and hinted that the $100 magic number is only a couple of years away. “We think we have come up with some pretty cool breakthroughs on energy density and cost of the battery pack,” said Musk, and indicated that Tesla is on track to reach a cell-level battery cost of $100/kWh by the end of the year, and to deliver the magic number of $100/ kWh at the pack level in less than two years. (For comparison, Electrek tells us that GM is currently paying about $145/kWh for cells, and Audi claims to be paying $114/kWh.)

Tesla-watchers’ ears pricked up at the word “breakthrough.” Electrek and others have calculated that Tesla won’t be able to deliver the promised performance of the Semi without a battery cost breakthrough. Far be it from Tesla to overpromise – ergo, said breakthrough must be in the offing.

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Written by: Charles Morris

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers, free of charge. Our thanks go out to EVANNEX. Check out the site here.

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57 Comments on "Tesla Is Approaching The Anticipated Magic Battery Cost Number"

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Brian

“Far be it from Tesla to overpromise”
I got a chuckle out of this one.

TM

Neither thumbs up nor thumbs down on your comment.

Brian

Thanks, TM. Thumbs up on your neutrality.

MDEV

Owner of three Tesla’s since 2012, I had all that Tesla promised, think this way, is the only brand of cars that gets better several times per year, any other car you buy stay as is no changes or improvements, I rather buy into the promises to the future that the status quo.

Will

As much as I like Tesla, I think it’s rather unfair to imply that other automakers aren’t making incremental improvements to their EVs with each successive generation. It’s also nonsensical.

JoeInthe UK

That though is not what MDEV said.
He said “gets better several times per year” you said “with each successive generation”

Big difference.

Prad Bitt

Yeah sure, 2% increment for greenwashing purposes…

Brian

Tesla has always eventually hit their technology targets, but they consistently overpromise on schedule and price. Schedule is so obvious that I shouldn’t even have to say it. And price? The Roadster was supposed to be $100k. Nope, it was more like $120k. They increased the price before the first was delivered (but after many had put down deposits). The Model S was supposed to be half of that. Nope, they cancelled the low-end one due to “lack of demand” before giving the market a chance to settle out, and even see where the demand was. The Model 3 was supposed to be half again of the S. Well, maybe eventually but certainly not today.

Taylor Marks

There was a lack of demand on the 40 kWh Model S, and it’s not surprising. Out of 20K deposit holders, only 500 people weren’t willing to to pay 15% more ($60K -> $70K) to have range boosted by 50% (140 miles -> 210 miles.)

windbourne

meh.
Other than production rate by a timestamp, they have delivered on just about everything they promise.
But yeah, Elon is always off on time.

John

Come on shorters, you’re losing your grip!

Clive

Your losing yours as well !

Chris O

I don’t know about any breakthroughs needed for semi but I still don’t understand how Tesla intends to fit the massive battery of a Model S/100 in the new Roadster…twice! Seems to me that takes quite a breakthrough.

Guess Tesla still has 2 more years to figure it out…

Jouni Valkonen

Chris, they already have a prototype Roadster ready and according to its test driver, the prototype already exceeds the specs announced and the production version will be still more powerful. Even without SpaceX upgrade! Therefore, they have already fitted the necessary battery volume into Roadster.

Note, due to volume constraints, SpaceX upgrade will replace two child seats in the back.

Pushmi-Pullyu

Right. Tesla has already fit 200 kWh worth of batteries into its prototype 2020 Roadster. No future battery tech improvements needed.

And Tesla never said it put two Model S/X 100 kWh packs into the 2020 Roadster. That’s just speculation. The battery modules may have been put into the car in a different configuration.

Benz

This 200 kWh battery pack of the 2020 Tesla Roadster, could they then also fit that into a Tesla Model S and into a Tesla Model X?

That would be much more interesting.

Chris O

I really don’t see any way of doubling the batterysize in Model S or X , that’s why I’m so surprised that Tesla can fit that sort of capacity in a much smaller car like Roadster.

windbourne

Doubling? Only by increasing energy density by 2. However, they are supposed to have a coming large increase.

antrik

The battery takes less the 10% of the volume of a Model S. Clearly, it could easily be doubled.

Of course that would eat into passenger and cargo space — and that’s exactly what the Roadster is doing.

Chris O

How do you know the prototype was fitted with 200KWh?

BTW: I didn’t mean to suggests that’ Tesla intends to fit 2 S/100 packs, may point was that the 200KWh pack would be almost twice the size of the S/100 pack. That’s just hard to imagine in a small car that’s also 2+2+plenty of cargo space as Tesla promises.

Paul Smith

With the upgrade the G forces would be too great for kids anyway.

Benz

The range would increase substantially, that’s why it would be interesting.

I’m not interested in more power and more performance.

windbourne

yeah, it is not like kids enjoy amusement parks like 6 flags or elitches.

Chris O

It’s a prototype, as such it’s perfectly okay if some of the promised tech isn’t operational yet. I’m sure it already meets most performance specs but AFAIK Tesla hasn’t confirmed that 200KWh pack was fitted in that prototype.

Nozuka

“Audi claims to be paying $114/kWh”

That’s actually pretty cheap already… They should easily be able to make a profit with electric cars without charging more. They get more than 3000€ with every car sold.

pjwood1

They also make lots of claims.

Jouni Valkonen

In Europe, the “magic number” is around 250 dollars per kWh due to high taxes on gasoline. 75 %, of gasoline price, is composed of taxes. At this level of battery cell cost, it would make sense to electrify 100 % of road transportation and significant part of aviation and shipping.

Still, nothing happens, because markets are opposing the change. No capital wants to make itself worthless and oil industry and its associates, there are lots of capital invested!

agzand

By converting fleet to electric, taxes won’t go away. They will be repackaged as road tax. So in Europe, expect to pay the same level of taxes on Electric cars at some point.

Will

A mileage tax would be better in every way.

Dan F.

Or just tax the electricity comparably to motor fuel; maybe they already do.

Pdb

In Belgium taxes on electricity are higher than on petrol. My guess is 100$/kWh is pretty much tipping point here as well.

Dan F.

It also,as always, depends on the cost of electricity in various EU countries. Doubtless a complex answer—type of user–time of day/week–peak load by user–monthly use, etc. etc.. Wonder what these costs are in France where the electricity is very low carbon.

Epicurus

One thing I have always wondered. Why have Europeans not rebelled against such high taxes on gasoline? The gasoline tax hurts poor people and people of modest means the most.

PPP

Because we agree that you should use less of it (i.e. move closer to work, use a bike, …)

Dan

There are universal society benefits to using less fossil fuels. Like less traffic congestion, less air pollution, less oil spills, less starting wars in the middle east to control a region so as to control the oil. People adjust accordingly to higher gas prices like live closer to work, use mass transit or carpools, people live in tighter communities without sprawling suburbs that can go on forever.

United States would be significantly different if we didn’t have such cheap gas. All things considered I think we would be better. Gas might be cheap but buying and maintaining 1 or 2 cars per household is expensive. Plus our transportation infrastructure condition is terrible and significantly underfunded for it’s size and age. Lastly United States is way behind many modern countries in mass transit.

Bottom line is cheap gas isn’t as good as it sounds.

John Doe

It is a way for the government to pay for schools, fire departments, public transport, police, infrastructure and so on.
It also stops trips that is not important, and vi ta pollution. It is also so expensive that many choose public transport.

Those who pollute, should pay for it.

The price really hurts, makes goods and services more expensive and may impact poor peoples ability to move freely.
So many people buy the vehicle with the lowest running costs. So in general a tiny diesel og gasoline engine. And in general also a small car.
In Norway, you’re a fool if you buy a new ICE car (if you can afford an EV that can do the job).

antrik

In Europe, poor people don’t own cars.

GA Patriot

Battery Boffins? Can I put that on a resume?

tftf

I can tell it’s an Evannex article by just reading the headline.

Sorry, but this propaganda…

tftf

PS: Meaning it’s unsubstantiated wishes and dreams based on Musk’s timetables.

ffbj

Sure, it is. Just keep telling yourself over and over until you come to believe it. Sort of like propaganda..

Get Real

Yeah, trolltft from Seeking more Shorters has such great insights–NOT!

Pushmi-Pullyu

Speaking of unsubstantiated wishes and dreams: How are your ongoing personal predictions of Tesla collapsing, and its stock price tanking, going these days? How much of the $2 billion lost this month (June) alone, by TSLA “shorters”, was yours, “tftf”?
😆 😆 😆

https://www.teslarati.com/tesla-tsla-shorts-2b-losses-stock-soars/

In the real world, this is quite substantiated:

Tesla’s global automobile sales totals:
2012: 2650
2013: 22,300
2014: 31,655 (+41.95%)
2015: 50,580 (+59.8%)
2016: 76,230 (+50.7%)
2017: 101,312 (+32.9%)

Ambulator

Or even easier, just look at the author’s name under the story. There is no reason at all for you to need to open up the story and make a comment.

Some of us enjoy reading Evannex fluff, some don’t. Just keep your opinion to yourself.

Pushmi-Pullyu

It’s an interesting psychological phenomenon that human beings have an obsession with large round base 10 numbers. The universe shows no preference for such numbers; no reason to prefer 100 to 99 or to 101. And if we were born with 12 fingers instead of 10, then the number we call “100” would be merely 84.

A very few years ago, $200 was proclaimed the “magic number” at which EVs would start being profitable to make and sell in large numbers. Today they’re saying $100. But either way, it’s a kindergarten-level of analysis. The cost of making EVs depends on many factors, of which the unit cost of a kWh worth of battery cells is just one.

Will

I’ve heard the $100 figure touted a lot, but I can’t say I’ve ever heard people meaningfully say that $200 is the magic number. At least not seriously, nor can I recall any particular occasion.

antrik

I have read some sort of analysis from a few years back, which was actually using something like $150 IIRC as the “magic number”…

antrik

Yeah, the “magic number” talk always seemed arbitrary to me. Performance EVs (like Tesla’s) have been at price parity with equally performant combustion cars for a while; but reducing performance doesn’t bring a long-range EV to price parity with an entry-level combustion car… Significantly shrinking the battery on the other hand could, if produced in sufficient numbers. But how much can we shrink the battery for an EV to still be considered “comparable” to an entry-level combustion car?…

There is no actual single point of “price parity”, since the economics are just very different.

Having said that, if we postulate 50 kWh as a reasonable entry-level battery size (there seems to be a sort of consensus forming around this number), by my estimation battery prices actually need to fall to around 65 $/kWh for EVs to match entry-level combustion cars on selling price alone.

(Which should happen about five years from now I guess.)

Pushmi-Pullyu

And let’s not forget that cell supply is just as important as cell cost. Arguably, that’s where Tesla (and BYD) have really advanced over other auto makers: in taking control of their own supplies of cells. Other auto makers are either going to have to wait for years for cell makers to ramp up production, or they are going to have to do what BYD and Tesla have done: build high-capacity battery cell factories whose production is controlled by the auto maker, not by the cell manufacturer.

Up the EV revolution!

antrik

Cell makers are ramping production to meet the orders from car makers. The real issue is realistically predicting demand some two years into the future — the question who owns the factories doesn’t really affect the situation in a significant way.

scott

As it was with computers, flat screen televisions, and cell phones, batteries will become far cheaper as they are produced in greater quantity. It is a simple matter of manufacturing more batteries, and costs will come down. Tesla is leading the way in this regard.

Will

That’s one side of the coin. More economical batteries is the other side. The two go hand-in-hand to drive down costs.

antrik

That’s true — but the additional R&D to create these more economical batteries in turn relies on higher revenues in order to pay off… So in the end, it boils down to larger production volumes too.

Henry

It appears that “missing promised deadlines” is the only thing that bashers of Tesla can come up these days. When the dust settles in a year or two, people look back and say “Wow, how did they do all that in such a short time ?”

The good thing is, Tesla has just barely started. There’re more to come in the very near future: Model Y, Roadster 2, Semi Trucks, Pickup Trucks, Solar Roofs and PVs, Powerwalls, … So many things to do, so little time.

Gasper

From the graph above I find it strange that Powertrain cost is so low and it stays the same through the years, accordingly vehicle cost seems high. I would have not thought that it’s this way.

Maybe the one who draw those graphs was focusing only on battery cost, but still why separate Powertrain and vehicle cost?

Jason

So $150/kWh cell cost, maybe $250/kWh pack cost, yet the Model 3 LR cost $9k for about 20kWh. If Tesla can convince people to pay almost twice the cost for that amount of kWh, makes you wonder why the other companies aren’t jumping into EV’s whole sale? Everyone tells me there is not much margin in cars, yet here is a product that represents a significant margin.
I just don’t get the car industry, they are reticent to get into EV’s, yet on every measure they would appear to be something that can turn a very tidy profit.

antrik

150 $/kWh is the estimated *pack* price — so the markup is even bigger.

I agree that offering different power train options is key to EV profitability — just like with combustion cars… Only makes sense though once reaching reasonable production volumes though, since otherwise more variants only increase costs even more.

(Legacy OEMs preferring large cells also hampers their ability to scale battery sizes, though.)