Gigafactory Report: No Price Reductions Until 2018

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Elon Musk made it clear that the battery Gigafactory is a cornerstone component of his plan for electric car domination, as is the $35,000 Model III set for a 2017 debut. Nevada has been selected as the site of the first Gigafactory, and with it come a new study that casts doubt on Elon’s battery cost-reduction ambitions.

A new report by Dr. Menaham Anderman, independent battery expert and head of the Advanced Automotive Batteries conference and publication, analyzes the potential for the Gigafactory to reduce battery costs enough to meet the $35,000 price point. His conclusion; it’s possible, but with a little less than the hoped-for 200-mile range.

According to Green Car Congress, Anderman predicts that Tesla and partner Panasonic will approach the Giogafactory in stages, increasing output by 5 to 10 GWh at a time. This will result in a slight decrease in battery prices around 2018, but not quite the $200 per kWh that was hoped for. This means the 200-mile Model III might have a starting price closer to $50,000 than $35,000 (the price predicted by another study, as it turns out) as a 70 kWh battery is probably necessary to get a real-world 200-mile range. That pack is estimated to cost around $14,000 in Anderman’s timeline, about 40% of the Model III’s price.

However, if Tesla can achieve 35 GWh of production by 2018, battery costs could come down enough to make that same 70 kWh battey pack cost about $11,700. That puts the price at $167 per kWh, which is the best-case scenario for Tesla, while more optimistic studies say a price of $100 per kWh might even be possible. Even at that price though, Anderman doesn’t expect annual car production to come anywhere close to utilizing the full 500,000 pack-per-year of the factory. By 2020 Tesla sales will only be at about 150,000 units per year, says the battery expert, which means that extra capacity could be used to build batteries for competitors.

Tesla fans will note that the 60 kWh Model S is rated at 208 miles per charge, so why does Anderman call for a pack that is 10 kWh bigger? That’s a good question, and one I don’t have an answer for. A $20,000 price reduction for the same driving range is a pretty good advancement in the span of 5 years, but it’s still $15,000 of the hoped-for mark. Keep in mind, the $7,500 Federal tax credit almost certainly won’t be available for Model III buyers if Tesla sticks to its aggressive expansion plans.

The next few years are crucial to Tesla’s success though, and the Gigafactory has to bring battery costs down enough to justify the billions of dollars invested in it. Even this study says the Gigafactory could still go either way.

 

Christopher DeMorro

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.