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Batteries Image Credit: Tesla Motors

Published on September 5th, 2014 | by James Ayre

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Tesla’s Gigafactory May Hit $100/kWh Holy Grail Of EV Batteries, Report Predicts

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September 5th, 2014 by  

Tesla’s Gigafactory may achieve the $100/kWh holy grail of EV battery pack costs, according to recent reports.

Most analysts within the EV industry consider the $100-per-KW-hour water mark to be the big “tipping point” for EV batteries — that is to say, the point at which EVs will be undeniably cost-competitive with gas-powered vehicles. That is to say, stocker prices will be competitive — fuel and maintenance costs are already much lower. (EV batteries makeup a significant portion of an EV’s production/manufacturing costs)

Image Credit: Tesla Motors

EV Batteries Tesla Gigafactory


 

In order to hit the predicted $100/kWh battery cost mark, the Gigafactory will have to surpass its stated goal of lowering battery costs by 30%.

This, according to The Motley Fool, is exactly what will happen:

When Tesla first announced the Gigafactory, it clearly stated in its plans that it expected that battery pack cost per kilowatt hour would be greater than 30% by Model 3 volume ramp in 2017.

Panasonic (arguably more knowledgeable and experienced regarding lithium-ion production than any company in the world) admitted that a 30% reduction by 2017 was, indeed, a conservative prediction. And Panasonic is putting its money where its mouth is, with its deal to partner with Tesla. Panasonic’s investment is considerable; during Tesla’s second-quarter conference call, CEO Elon Musk said that he expects Panasonic to invest as much as $1.2 billion-$1.6 billion of the $4 billion the company expects to spend on the factory by 2020.

Not only does Tesla view 30% cost cuts to its batteries as conservative, but Musk said during the second-quarter call that he would be “disappointed if it took us 10 years to get to $100 a kilowatt-hour pack.” Since Tesla hasn’t shared exactly where its costs are today, it isn’t clear what percentage of a cut that $100 per kilowatt hour is to today’s cost, but as Deutsche Bank analyst Rod Lache noted during the call, it is low enough for Tesla’s electric vehicles to reach cost parity with — and possibly even improve upon — the cost of an internal combustion vehicle.

So, there you have it. All signs are still pointing toward the Gigafactory being every bit the game-changer that it’s been predicted to be.

We’ll know if this is true in a few years…

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About the Author

's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.



  • Mike Shurtleff

    Very interesting comments by Musk and Panasonic. Thank you for passing these on.

  • Kevin McKinney

    Intriguing to see this just a day or two after a Lux Research analysis claimed just the opposite:

    http://cleantechnica.com/2014/09/04/lux-research-predicts-50-overproduction-for-gigafactorys-li-ion/

    Dueling PR?

    Of course, the Lux analysis was pretty thoroughly derided here, at least. Still, it makes me wonder a bit just when that conference call happened.

    • S.Nkm

      If there’s overproduction the price will fall even further…. which will lead to more sales and more demand?

      • Kevin McKinney

        Yes, that’s a factor I thought of, too. Did Lux? They apparently didn’t discuss it.

    • Mike Shurtleff

      “Lux analysis was pretty thoroughly derided here”
      Yes, I believe three good points were made:
      1. LUX is probably not counting on continued exponential growth in EVs/PHEVs. EV/PHEV production is already growing much faster than HAV production did.
      2. There will be large demand for Stationary Storage for Solar PV and Wind. This has started now.
      3. Tesla ramp of their battery production at this plant is going to be staged. Tesla has already stated this. They will build production lines as rapidly or as slowly as they need to. If they aren’t selling enough batteries, then they won’t build as many production lines, they won’t ramp as quickly.
      Considering those points makes the LUX prediction seem a little over the top negative.

      • Kevin McKinney

        Yes, it did, and does, seem excessively negative. But this is a forum that would critique it and similar analyses, possessing both motive (in the form of a favorable attitude to EV/alt energy) and opportunity (in the form of a wide knowledge of some other relevant trends.) Perhaps Tesla wanted to counter Lux, which could conceivably gain a little more traction with less well-informed folks? Just speculating; it could after all be coincidence.

        • Mike Shurtleff

          “Perhaps Tesla wanted to counter Lux, which could conceivably gain a little more traction with less well-informed folks?”
          Yes, got that and agree it is very much a possibility.

    • http://zacharyshahan.com/ Zachary Shahan

      The story referenced above actually came out first. It just took us forever to write up the piece (long story). But, yeah, very different assumptions. All about the assumptions… And who knows who is trying to guide the market or investments via their reports?…

      • Kevin McKinney

        So much for speculation! Thanks, Zachary!

    • jonnny

      That article makes huge assumptions, and then makes huge assumptions off of their huge assumptions. No one knows how much Telsa currently pays per kwh for their batteries. The numbers they used are wild guesses. And Musk has mentioned many times that the gigafactory will sell batteries to Tesla, plus also sell battery packs to other car manufacturers (which they already do), to SolarCity, and to utility companies and industrial companies. SolarCity doesn’t sell a lot of battery back ups right now because they don’t have a good source, but that will change quickly. Tesla could also sell batteries to laptop manufacturers and any other product that needs li-ion batteries. The battery cells can be placed into any kind of configuration a product needs.

  • Vensonata

    Now let’s see. A 200 mile range tesla, should need a 50 kwh battery (remember they are smaller and lighter than the tesla S) 50×100= $5000. Two years of gas, $5000. Hmmm, so you get the battery free after two years, plus electric cost which would be about $1000. So 30 months of gassing cancels the price of an electric motor. And what does an I.c.e. cost. Beats me, but say $4000? (out of my depth here…join in)

    • Will E

      put Solar and fill up at home.
      or community solar charge stations to make money for the schools sports and voters.
      locally produced clean profits.

    • Mint

      I think by the early 2020′s, two years of gas will cost much less than $5000 due to more efficient cars. Don’t forget that cell cost is only one part of the battery pack.

      ICEs are cheap for low power motors (less than 150hp), but I think electric motors and controllers can match them in price once volume gets high. For high power engines, electric motors already have an advantage, and it’ll soon get bigger.

      • Vensonata

        Two considerations: do they mean $100 kwh battery pack or $100 kwh battery? Big difference. Next: car mileage by pure I.c.e. can’t improve much but hybrid mileage could cut gas bill by 75%. The catch here is that hybrids use batteries to do that. Which is fine. Basically the competition will be between hybrids and pure Ev. That, I can stomach.

        • No way

          Battery pack. They think Tesla is somewhere around $200 per kWh at pack level today (about $100/kWh for battery and $100/kWh for the rest of the costs). So the goal seems to be reducing every cost that is not for the battery a lot, hoping to get down to $75/kWh for the battery and another $25/kWh to make and deliver the pack.
          But there is a lot of speculation and very little admitted facts so…

        • Mike Shurtleff

          Correction:
          Competition will be between PHEVs (of the EREV variety) and EVs. HEVs and ICEVs are both going away.

          • Bob_Wallace

            I can’t predict which goes away first, but do find this graph interesting. You can make your own assumptions about battery and gas prices and see who survives longest.

          • Mike Shurtleff

            Nice graph, but I don’t think 2-dimensions can do the comparison justice. PHEVs are increasing their sales more rapidly than EVs right now. Reason is simple. Smaller, lower-cost battery and unlimited range. This graph doesn’t really show that.

            HEVs are mechanically complex (parallel-series drives), which means expensive to make. They don’t really provide the fuel use reduction of PHEVs (>200 mpg for many Volt owners, don’t know the Volt site average off the top) and EVs (no fuel use, only electricity).

            HEVs are going to mostly disappear along with ICEVs (gas mobiles). My prediction for what it’s worth.

          • Bob_Wallace

            But as battery prices drop, ranges increase.

            Most people will realize that 200 mile range is enough. PHEVs will, I think, get squeezed out by affordable longer range EVs. If one can drive 3-4 hours before stopping for a 20 minute recharge they’re likely not need the range extender.

            But, whatever, both EVs and PHEVs solve our oil use problems.

  • Jouni Valkonen

    yet again irrelevant and tech-ignorant “analysis”. Actually $250 per kWh is sufficient in price category above $40 000. Therefore electric cars could have about 5 % market share or over four million electric cars sold globally.

    At this point of the evolution of technology we should not even think that electric Ford Fiesta is what we want. Today we need to have an electric Audi A6 Quattro. That is electric cars make sense in price category over 40 to 50 kilodollars and EV incentives should be directed as such that it does not make economic sense to buy non-electric luxury cars.

    • Mint

      Electric cars have an ace in the hole: smartphone-like pricing models. Subsidize up front, get profitable monthly payments to make up for it.

      There must be well over 120M GM vehicles on the road worldwide, and their owners are probably collectively paying $15B per month in fuel on average, with none of it going to GM. That’s more than their sales revenue. EVs could let them tap into that.

      I think the simple battery lease models require too much math for common consumers to figure out. What we need is a simple concept like an eGallon, which you purchase for $3 and it drives you 40 miles guaranteed, including free electricity if you charge at night. The automaker partners with utilities, paying them 8c/kWh while also tracking and controlling the EV’s consumption (no need for a separate meter or smart network). The utilities love this, because their grid has so much idle capacity at night and electricity is cheap, so even 8c/kWh is highly profitable. So now $1 of that eGallon goes to the utility, and the automaker keeps $2, or 5c/mile.

      With a Tesla recently clearing 100,000 miles with only 5% battery degradation, it’s fairly clear that EVs can easily last 200k miles. So that’s $10,000 of revenue tricking in over 15 years. The automaker maybe gives you a $6-7k discount for enrolling in this plan.

      That’s my theory about how long range EVs will get cheaper than ICEs of similar performance.

      • Will E

        absolutely right.
        15B a month burned in cars.
        The Giga factory of Elon Musk will make that money.
        I like the math.

      • http://zacharyshahan.com/ Zachary Shahan

        Ever since Shai Agassi’s posts on LinkedIn along these lines, I’ve been eager to see someone try to pioneer a better pricing system. Still waiting. Gold for anyone who did so, imho.

        • Mint

          I’m sure Musk has plans for it, because that’s exactly how Solar City became so huge (“Pay for power, not panels”).

          But I think he’ll go down that road only when he needs more demand. The Model 3 is probably going to achieve price parity with the 3-series, C-class, etc so he won’t need it for a while. Such a scheme requires a bit of capital (that Tesla could otherwise use for expansion), and it’s a little riskier to banks than financing/leasing.

          I could really see this working with the pickup truck Tesla will probably build. There, you could do $3 for 25 miles and get a $10-15k discount.

          • http://zacharyshahan.com/ Zachary Shahan

            Good comments. Thanks.

        • Petra Liverani

          But what about this sort of EV cost targeted by Foxconn in China – less than $15,000. Doesn’t give specifications but presumably the range will be reasonable.
          http://www.electric-vehiclenews.com/2014/09/foxconn-invest-800m-to-build-electric.html

      • Jouni Valkonen

        At this point, it is not required that EVs are cheaper than ICE cars. It perfectly sufficient that EV is cheaper than Audi A6 Quattro. This alone will open a markets that have annual markets more than one million electric cars sold.

        And by 2017 with Gigafactory we could target Audi A4 Quattro and further expand the markets.

        • Mint

          At this point, yes.

          But when we talk about “the holy grail for EV batteries”, we’re talking about markets much larger than that. Even when we’re making 5M EVs per year, that’s still just putting a dent in the global market.

          • Bob_Wallace

            The holy grail is a capacity/cost combination that makes it possible to market a ~200 mile range same-model EV for only a few thousand dollars more than an ICEV. A price premium in the $3k to $5k range would do it. That would mean that the extra monthly payment would be more than covered by fuel savings and the overall recovery would be in the neighborhood of 3 years.

            As for denting the global market, EVs will bleed out the global market. They’ll hit 1% of total sales based on the battery factories we build now/very soon. Then as more EVs are built ICE plants will start closing and battery plants will open.

            We’ve seen this happen over and over and over. New tech shoves old tech aside.

          • Mint

            I hope most people will pay $5k more for an EV, but I’m not convinced.

            After tax credit, the C-Max Energi is less than $1000 more than the equivalently spec’d C-Max Hybrid, but it’s still only 1/4 the sales. I understand that the C-Max has only 20 miles of electric range, but that’s still enough to make the regular hybrid pointless, IMO. Yet the market disagrees with me.

            I think EVs will need lower up front price and lower fuel cost to truly take off.

          • Mike Shurtleff

            Rule of thumb for disruptive displacement of incumbent technologies is to be 1/2 the cost, enough for financing the transition and still having some savings.
            I don’t really think EVs/PHEVs will need to be 1/2 cost, but they will need to be significantly cheap for people to break their ICEV paradigms of thought and move over.
            The good news is they will do it. People respect their wallets.

          • Bob_Wallace

            I think EVs need to be cheap enough for the price premium to be covered by the fuel and maintenance cost savings during payoff.

            $5,000 @ 5% over 5 years <$95.
            $5,000 @ 5% over 3 years <$150.

            There's likely to be some value to avoiding gas stations. Some value in the responsiveness and quietness. And some desire to move on to the 'new thing'. Those sort of things transcend the math.

          • Mike Shurtleff

            Good points. Yes, I think transition will occur very rapidly when total costs of EVs, including fuel and maintenance, are lower than for gas-mobiles. I think the benefits you mention are part of the reason we will not need to get down to 1/2 the cost. Maybe a bigger part is the size of the investment for most people. If you can save a few thousand, or more, over the life of the vehicle, then that will sell a lot of EVs …maybe. They’re already selling fast now, so probably.

          • http://zacharyshahan.com/ Zachary Shahan

            I think that’s primarily an awareness thing, which comes somewhat slowly and then bursts.

          • Jouni Valkonen

            You cannot dream a mass market EV before you have the first 1% market share. If today electric cars make sense among cars that are more expensive than 60 000 dollars, next year they make sense among cars that cost more than 55 000 dollars, because the cost of battery tech is getting down when the volume of battery production is expanding.

          • Mint

            I don’t disagree.

            I was just pointing out that my remarks were about going well beyond “at this point”. To go beyond 10M units per yea, I think EVs will probably have to be cheaper than ICE up front.

          • Jouni Valkonen

            Long range electric cars could be competitive even with higher up front costs because it can be expected that battery will last the whole service life of car, or >500 000 km.

            The problem with Nissan Leaf is that its battery electricity is not particularly cheap, because it is necessary to replace battery after 100 000 km driving or so. And who would like to buy new 6000 dollar car battery to LEAF that has been driven 100 000 km? You might as well buy a better ICE car than LEAF with that 6000 dollars.

          • Mint

            Jouni, it’s not that simple. Look at my example of the CMax. Look at what Mike said. Even though 1/2 isn’t necessary, it’s still likely that you’ll need a discount to disrupt the current paradigm. IIRC, 65% of new car buyers are over 50 years old. They grew up with a fond love for the ICE.

            People don’t do lifetime math when they buy a car. They don’t even do 5 year math (look at regular hybrid sales going down in an up year for auto sales, or the sales disaster of hybrid truck/SUVs). They hardly even consider resale value, because it’s unpredictable.

            With the Leaf, just lease and let Nissan deal with battery issues. That’s not its issue.

            It’s just fundamentally a tough battle to get the mass market choosing an EV.

          • dara_parsavand

            I agree that battery lifetime is an issue. It’s not $100/kWh that matters most to me, it’s the 8c/mi battery cost if you are need a $5k replacement after 60k miles. That cost is more than the energy cost to charge it (assuming 3.5mi/kWh). If they can make two batteries, one that costs 20% less to purchase but due to lower lifetimes costs 10% more per mile, I’ll take the more expensive battery. I hope in the future we discover a much longer lasting cell type even if the energy density is a bit lower than current lithium cells.

      • vazarus

        Hire this guy. Genius.

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