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Published on March 9th, 2010 | by Nick Chambers

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Electric Car Battery Prices Dropping Much Faster than Expected

March 9th, 2010 by  
 

One of the biggest barriers to the adoption of electric cars, plug-in hybrids and extended range electric vehicles is cost. The biggest part of that added cost is the battery. In the past, estimates of roughly $1000 per kWh of battery capacity have been thrown around as a way to gauge how much of a premium consumers can expect to pay. Given that it takes roughly 25 kWh to go 100 miles, you can see how this would quickly add up.

Recently, however, the cost of lithium-ion batteries has been dropping more steeply than expected; indicating that the potential in the market to reduce the premium of owning a battery-powered car has been greatly underestimated.

The Volt is expected to cost $40,000 when it’s introduced. And, while Nissan has consistently said the LEAF will cost about the same as a conventional similarly-equipped car, it is still expected to cost around $25-30K with a driving range of 100 miles (a 24 kWh battery pack)–although it remains to be seen how, exactly, they will accomplish that… Perhaps with some creative leasing and/or financing terms that may include the lease of the battery? Other vendors, like Mitsubishi with their i-MiEV, seem to be hinting in the $30-40K range as well. Sure there will be a tax credit of $7,500 to be had in the US, but I’m talking apples to apples here, not government-subsidized apples to unsubsidized oranges–unsubsidized is the only way to ensure long term success.

Clearly these prices, purchasing terms, and/or limited range due to battery size will be an impediment to full scale adoption. Until we can get battery prices down to level where the car pays for itself in 5-10 years of not using gasoline and we can pack more battery power in without adding hugely to the cost, the electric car market may be stuck in a rut.

Well, good news. Deutsche Bank has just come out with an analysis of the lithium-ion battery market, and they conclude that battery prices have been dropping much steeper than expected, saying they “believe that the market underestimates the┬ápotential for growth in this segment.” Just last November DB issued a report saying that they expected battery prices to decline 25% by 2015 and 50% by 2020. Yet in the new report they say they are already seeing a decline of 30% for orders being placed for the 2011/2012 model year. If this is extrapolated out, we might see declines of 50% by 2015/2016.

Once batteries get to 50% of what they cost right now (about $650/kWh at the end of 2009) then the added cost of a battery becomes relatively minor compared to the cost of an engine and associated exhaust systems. And if we can get to an 80% reduction by 2020, then clearly EVs are the winner at that point.

However, for the early adopters out there, they might feel the burn of buying something that can be bought for half the price 3 years later (any early iPhone owners out there care to weigh in on how this feels?)

You can read the whole DB analysis for yourself below.

Deutsche Bank Electric Car Analysis – Batteries

Source: GM-Volt.com


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About the Author

Not your traditional car guy.



  • As battery production increases, a big cost reduction is very predictable.

    And, with companies adding production capacity like crazy (to collect Government loans and subsidies), there may be a glut of batteries that reduces prices even further.

    Finally, as energy density improves and the storage capacity per cell jumps, this will drop the cost per KWH even further.

    In the not-too-distant future, it will be cheaper to produce electric vehicles than ICE vehicles. They’ll have fewer parts and require less engineering, assembly, testing, materials, regulation, etc.

  • As battery production increases, a big cost reduction is very predictable.

    And, with companies adding production capacity like crazy (to collect Government loans and subsidies), there may be a glut of batteries that reduces prices even further.

    Finally, as energy density improves and the storage capacity per cell jumps, this will drop the cost per KWH even further.

    In the not-too-distant future, it will be cheaper to produce electric vehicles than ICE vehicles. They’ll have fewer parts and require less engineering, assembly, testing, materials, regulation, etc.

  • We are all aware of how prices fall with tech. No longer are we going to be stuck with cars based off 100 year old mentalities. On the bright side, when your battery finally dies you can go out and get a much better one for much less. I for one would get the smallest battery I could stand and just wait for it to die, then upgrade to a bigger battery at half the cost of the first one.

  • We are all aware of how prices fall with tech. No longer are we going to be stuck with cars based off 100 year old mentalities. On the bright side, when your battery finally dies you can go out and get a much better one for much less. I for one would get the smallest battery I could stand and just wait for it to die, then upgrade to a bigger battery at half the cost of the first one.

  • Tim Cleland

    “However, for the early adopters out there, they might feel the burn of buying something that can be bought for half the price 3 years later (any early iPhone owners out there care to weigh in on how this feels?)”

    I would just like to add that this is just one more circumstance in which having “rich people” around is really nice. For all the political demonization of “rich people” these days, they not only are the ones who create jobs, but they are the ones that take that initial hit on new technology and make things like microwave ovens, computers, HD-TVs, and electric cars affordable for the rest of us. Do they do it out of the goodness of their heart? No, they do it because it improves their own lives. That’s the very basis of capitalism.

  • Tim Cleland

    “However, for the early adopters out there, they might feel the burn of buying something that can be bought for half the price 3 years later (any early iPhone owners out there care to weigh in on how this feels?)”

    I would just like to add that this is just one more circumstance in which having “rich people” around is really nice. For all the political demonization of “rich people” these days, they not only are the ones who create jobs, but they are the ones that take that initial hit on new technology and make things like microwave ovens, computers, HD-TVs, and electric cars affordable for the rest of us. Do they do it out of the goodness of their heart? No, they do it because it improves their own lives. That’s the very basis of capitalism.

  • Houston Dav

    I am not rich but will be waiting in line for one of the first ones. Prices may come down in a few years but the 7.5k sub will be gone by then and in those three years I estimate a 6k savings on gas at current prices (2.85) in 3 years (I drive alot, 65 mile commute every day plus ~100 miles in the weekends just a trip to the mall is 44 miles round trip). So that would make a 13.5k savings in 3 years, will the car drop that much in price? Plus I will only have one more year of car payments, then the car starts paying me back in gas savings. At this rate the car would be free in 11 years. Less if gas keeps going up which it will. When was the last time you bought a brand new car and got your all your money back over time.

  • Houston Dav

    I am not rich but will be waiting in line for one of the first ones. Prices may come down in a few years but the 7.5k sub will be gone by then and in those three years I estimate a 6k savings on gas at current prices (2.85) in 3 years (I drive alot, 65 mile commute every day plus ~100 miles in the weekends just a trip to the mall is 44 miles round trip). So that would make a 13.5k savings in 3 years, will the car drop that much in price? Plus I will only have one more year of car payments, then the car starts paying me back in gas savings. At this rate the car would be free in 11 years. Less if gas keeps going up which it will. When was the last time you bought a brand new car and got your all your money back over time.

  • Jay Tee

    Tim Cleland- good point, I agree completely.

    I’m very poor, but I won’t demonize rich people. They are the early adopters who will get the new energy economy going.

  • Jay Tee

    Tim Cleland- good point, I agree completely.

    I’m very poor, but I won’t demonize rich people. They are the early adopters who will get the new energy economy going.

  • John_balls

    Oh tim give it a rest with your dogmatic rant about capitalism. I have nothing against people of wealth but cmon you sound like you just finished coming out of a rush limbaugh seminar.

  • John_balls

    Oh tim give it a rest with your dogmatic rant about capitalism. I have nothing against people of wealth but cmon you sound like you just finished coming out of a rush limbaugh seminar.

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