Electric-Car Battery Costs To Decline To $200/kWh In 2020, McKinsey Says

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Tesla Motors - Model S lithium-ion battery pack

Tesla Motors - Model S lithium-ion battery pack

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It's not for no reason that electric cars are more expensive to buy than their fossil-fueled counterparts.

If you wanted to point the finger of blame squarely at one thing, you'd likely be pointing it at batteries.

At the moment, a typical lithium-ion battery pack costs around $500-$600 per kilowatt-hour. That means the 24 kWh pack in a 2012 Nissan Leaf may have cost between $12,000-$14,400 to manufacture--a significant proportion of the vehicle's cost.

Analysts have long been predicting that the cost of batteries would fall, but the latest study from McKinsey suggests it could fall quite dramatically by the end of the decade, and at an even faster rate before 2025.

Cheaper Leafs, Volts

By 2020, the cost per kilowatt-hour could have dropped down to $200, making the cost of that Leaf battery pack only $4,800. By 2025, that cost will have fallen further, to only $160 per kWh. That would bring the manufacturing cost of the pack in a Nissan Leaf down to $3,840--up to $10,000 less than it is today.

Automotive News provides another comparison, using the Chevrolet Volt. At $500 per kWh, a Volt battery costs $8,000. In 2025? Just $2,560, not including inflation.

The McKinsey report suggests that nearly 30 percent of the cost reductions will come from improved manufacturing processes, and being able to spread the cost over higher production volumes.

Another 25 percent of the reduction would be down to lower components prices, and 40-45 percent of the cost reduction would come from advancements in anode, cathode and electrolyte technology--which would also bring about increases in battery capacity.

Who knows for sure?

Other recent studies have offered different variations on the cost of Li-ion batteries. One suggested that the batteries are already at $250 per kWh, and Pike Research has only given a hazy 2020 estimate of between $225 and $500 per kWh.

An interesting consequence of electric cars becoming more accessible to consumers--due to lower prices--could be greater advancements in non-electric vehicles in order to compete. John Newman, a co-author of the McKinsey report, suggests we could see advancements in areas such as variable valve timing and dual-clutch transmissions.

Russell Hensley, another author of the report, says that carmakers will have to take lower battery prices into account when developing their product plans--ensuring the future electric vehicles are positioned correctly in the market. It may also spur some manufacturers into expanding their electric portfolios.

Newman adds that the advancements may not even come from within the auto industry, but will first be seen in the consumer electronics industry.

So keep your eyes on the iPhones, as it could well be an indicator of where electric cars are going...


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Comments (12)
  1. i think battery prices are already much lower than advertised to volume production. BUT, that has NEVER determined the price of a product and this is no exception. EVs compete against ICE. batteries will be priced competitively based on gasoline prices. not as volatile of course, but EV manufacturers will be looking at ways to profit and keeping battery prices artificially high will be one way.

  2. Well, the future is hard to predict but what is more interesting is the baseline battery price of $500-$600/KWH. These are the lowest numbers that I remember GCR using as a baseline for discussion. More often it has been $1000/KWH. This is a big change in the discussion.

    Having seen commercially available batteries at retail for $400/KWH two years ago, I am not surprised at the predictions for much lower prices in the future.

  3. Mind you, applying this $500-$600/KWH to the Nissan leaf is utterly baseless. The closest hint Nissan ever gave about it's battery cost was $375/KWH.


  4. It's not "baseless", it's just a simple extrapolation of the current battery prices, applied to a commonly-recognized model. Or basic math, by another definition.

  5. You don't know current battery prices, only speculations of battery prices by "experts". You certainly don't know where Nissan is in terms of its battery costs. Carmakers generally are not eager to share cost information so all we mere mortals have is speculations I'm afraid.

  6. Indeed, there was a survey of "experts" within the last year that showed the current price anywhere from $600-$1200/KWH. That is a big range.

  7. And it's my job to report on that speculation. You'll note I also commented on the wide range of prices suggested in other surveys.

  8. Since the Tesla has been using off-the-shelf batteries and we know their exact number, estimating their cost shouldn't require a private eye or commercial espionage. For that car, the various battery size options are priced and one can see at least what the owner is paying per kilowatthour. There is also the factor that the faster a battery can be recharged, the fewer one can get by with. A battery pack of 250 miles range is good enough if one can recharge in 10 minutes but not if it takes hours. And a battery's
    lifespan costs is not determined by dollar-per-kilowatt initial costs. A battery lasting twice as long essentially is twice as cheap. A $200 per kWhr battery lasting 6-8 years is not cheap enough, at least not for my (mostly)DIY EV

  9. What is very important is to identify what is included and what is not. Looking just at the price of cells leads to one answer and a complete battery pack with all the materials, labor, including support tray is another, but what else is included or is part of vehicle? BMS? Charger? coling system? what is in the number and what isn't. Probably a factor of 2x based on what you include and don't. People who write these studies and do not explain the basis have not a clue of what they are talking about.

  10. As someone who is working for a major Li battery OEM, let me tell you this: the prediction is totally baloney!

  11. @Amy: Totally baloney in what way? Too optimistic or too pessimistic? And is your "major Li battery OEM" involved in selling cells to the auto industry? The more context you can provide for your comment, the more valuable it will be to our readers.

  12. Has any body seen the Envia System New type Batteries that will let the Electric car go 400 Mile on a charge and they have a test where they put a nail through a standed battrie and there's battery does not blow up it is real safe.

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