Battery prices and EV market penetration - EV Obsession



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  • #11714 Reply

    Max Holland

    Thanks to Zach for creating these forums. Zach’s recent battery price round up on Cleantechnica (http://cleantechnica.com/2016/05/15/ev-battery-prices-looking-back-years-forward-yet/) provoked me to do some back-of-envelope calculations about how evolving battery prices would affect EV sticker prices, and relative market penetration compared to ICEVs. I repost part of that conversation here, and welcome any feedback.

    ==
    All we keen observers know that battery cost is key to overturning ICE vehicles (and thus ending the fossil fuel era), so we are all interested in this topic. I was also interested to run some numbers to see at what $/kwh various EVs reach sticker price parity with ICEs in an equivalent market segment (assuming for simplicity that the non-drivetrain features/quality/costs/price are identical) and without subsidies. I emphasize that given the much lower running costs and many other benefits of EVs, they don’t have to reach sticker price parity to become more attractive to the average buyer than ICEs, but nevertheless to understand the pattern might be interesting. There are lots of variables, so I have assumed that a 200 mile range 50kwh battery is seen as ‘minimum comfortable’ in mid-market segments ($25k to $50K), as Telsa and GM figure and many commentators suggest. I am focussing in on mainly these (arbitrary) price points, but they do straddle the ‘average’ US new car sticker price (around $33k). More on my assumptions below.
    At 200 mile range, an EV is at ‘sticker price parity’ with an ICE at the following $/kwh:

    At anything > $75k price point, parity is already reached (at $200/kwh)
    At the $50k price point, parity is at $150/kwh
    At the $33k price point, parity is at $100/kwh
    At the $25k price point, parity is at $75/kwh
    (At the $20k price point, parity is at $60/kwh)

    Again – this is only sticker price parity – the mass-market value proposition of course comes in well before parity is reached due to big savings on running costs and many other EV benefits! But even for a Luddite who thinks that the sticker price of an EV should be ‘no higher’ than its ICE equivalent, and is satisfied by a 200 mile range, these are the numbers.

    My assumptions are based around a 2014 academic study (Kochhan et al. ‘An Overview of Costs for Vehicle Components’) suggesting that the non-battery cost of electric vehicles are around 90-92% of an equivalent ICE vehicle. They figured that the 76-78% of non-drive-train costs are similar, but the EV drive train (excluding battery) might make up just 14% of the remaining cost (compared to the ICE drive train costing 22-24% of an ICE vehicle). If this is correct (or was correct in 2013-2014 when the research was done) it leaves 8-10% of the remaining vehicle cost for the battery. In the longer run I assume this 8-10% will be conservative because in EVs, inverters, motors and other electrical components can get significantly cheaper with volume and technology learning, relative to 2013-14 costs. Non-drivetrain costs could also turn out to be cheaper relative to ICE vehicles, e.g. vibration tolerances can be lower, engine noise insulation and heat insulation lowered, electrical auxiliary systems relatively less costly (amongst other things, please suggest ideas). So to give a baseline to the variables, I assume that as volume increases, total non-battery vehicle costs might get down to 85% of the equivalent ICE vehicle costs, which leaves us 15% margin to absorb the battery cost. If anyone wants to suggest an alternative figure, that would be welcome. The above parity figures already assume this 85% figure.

    What is interesting for me is that the figures suggest that at $100/kwh, everyone happy with 200 miles range who is buying a new vehicle around the $33k price point (or above) will automatically choose an EV because it’s sticker is going to be cheaper. Musk is on to something! 😉 Given the running cost savings and other benefits, likely this will hold at lower price points also (likely anything above $20k-$25k).

    For folks who are happy with an urban-only vehicle with 100 mile range (and rent something else for occasional longer trips) the sticker parity comes earlier/at lower price points (I assume a 25kwh battery):

    At anything > $33,333 price parity is already reached (at $200/kwh)
    At the $25k price point, parity is at $150/kwh
    At the $20k price point, parity is at $120/kwh
    At the $15k price point, parity is at $90/kwh

    As I’ve mentioned – I am not claiming price parity is necessary for an average buyer to choose an EV over an ICE. There are lots of other savings and benefits to EVs, so this is just a baseline to work from. I’d appreciate others suggesting how these savings might add up to make the e.g. the 5 year ownership proposition at 10k or 15k miles a year an equivalent (or better) overall proposition relative to ICEs in different segments. Regulatory factors may well overtake these considerations anyway, as Netherlands and Norway already plan to outlaw new ICE sales for passenger vehicles after 2025. We will likely be at $100/kwh (or better) by then, so the market above $33,000 (or likely 20-25k given other savings & benefits) will effectively already have ‘banned’ ICEs. So it is within reason. The value proposition for EVs is higher in Europe anyway due to significant fuel duty, and generally less long-distance road trips etc. Carbon taxes will change the boundaries for ICEs also in favour of EVs. And of course fully autonomous vehicles will change everything completely, since most city dwellers likely won’t bother with car ownership at all.

    I welcome any feedback, cheers.

    [I had a brief exchange with Bob Wallace]:

    [Bob]:
    I don’t see any problems with your numbers but would like to suggest that purchase price parity is not as important as monthly out of pocket costs during payoff.

    Let’s assume a six year loan at 4.5%, 13,000 miles per year, $0.12/kWh electricity and $3/gallon fuel. Here’s a really rough monthly cost to own and operate….

    A $35k Tesla Mod3 with no subsidy = a $28k ICEV

    A $35k Mod3 with $7,500 subsidy = a $22k ICEV

    [Max]:
    Thank you Bob for filling in some numbers for the rough 6 year cost around this price point, making the EV proposition even more compelling. For a $33k segment EV to be the same longer term value as a $28k segment ICEV even without subsidy is great for consumers; there’s definitely going to be a word-of-mouth (and media) effect to spread this ‘good value’ message once the Model 3 and Bolt start getting into circulation – especially since they will both have sports car performance (more-so the Telsa). One other conclusion from my looking at the numbers, and the upper and middle price brackets favouring EVs first, is that ICEVs will increasingly be associated with lower price brackets and have a negative connotation, further boosting the image/status of EVs. Roll on the EV revolution! Cheers

    [Bob]:
    ” ICEVs will increasingly be associated with lower price brackets and have a negative connotation”

    That’s a factor that I don’t know how to monetize, but ICEVs are likely to be seen as ‘old tech’ and will lose cache.

    “What? You’re still using a crt monitor gasmobile? You stuck in the past?”

    #11755 Reply

    Zach
    Keymaster

    Thanks! Great stuff! And I hadn’t seen this discussion.

    Love this breakdown for 200 miles of range:

    At anything > $75k price point, parity is already reached (at $200/kwh)
    At the $50k price point, parity is at $150/kwh
    At the $33k price point, parity is at $100/kwh
    At the $25k price point, parity is at $75/kwh
    (At the $20k price point, parity is at $60/kwh)

    And this one for 100 miles;

    At anything > $33,333 price parity is already reached (at $200/kwh)
    At the $25k price point, parity is at $150/kwh
    At the $20k price point, parity is at $120/kwh
    At the $15k price point, parity is at $90/kwh

    I agree that working in subsidies is worth doing when sharing this widely (and maybe with the with-subsidies numbers shown first). But great nonetheless.

    Think this is a good system to use for tracking the coming disruption of the auto market. As we get more info on battery pricing, we can look back at this.

    Thanks for contributing! 😀

    #11769 Reply

    Brian D Anderson

    This is a great topic and there will be lots to discuss as battery technology is moving fairly quickly. Battery cost is clearly the largest discriminating factor in EV cost overall, but I don’t believe that cost itself is the primary driver of the EV market, nor will be for quite some time. The big factors today are related to refueling (recharging), which is, of course, ultimately a defining characteristic of a battery-powered vehicle. Regular readers know the pros and cons:
    Pros

    • Convenience of charging at home
    • Ability to use renewable energy sources
    • Safety (often mis-understood as a battery negative)
    • Cleanliness – no toxic fumes

    Cons

    • Long charging (refueling) time
    • Limited lifetime (cycles) (typically mitigated by over-design)
    • Weight (mitigated by low center of gravity and instant torque)
    • Lack of long-distance recharging infrastructure (mitigated in Tesla’s case by SC network, but not for others yet)
    • NYFC (not your father’s Chevy, in other words, too different from the status quo

    Regular readers no doubt mostly agree that the pros easily outweigh the cons, but when talking to non-enthusiasts / non-owners, it is important to understand how large the last Con (NYFC) looms in the minds of late adopters and laggards. Thus, being respectful of people’s resistance to change is just as important as being able to discuss the rational Pros and Cons as you go out to convert the world to the joys of Battery Powered Driving. 🙂

    #11771 Reply

    John Cole

    Bit embarrassed to admit this but I have always had a problem with maths, can someone provide an idiots guide to the KWH parity guide?
    Ta, regards John Cole

    #11772 Reply

    John Cole

    While I can understand the battery costs (just) I would have thought the savings on transmission costs, cooling and the general costs on pumping oil coolant and fuel around would have had a greater mitigating effect on the overall costs of an EV?
    Why is this forum only allowing me to type in tiny letters?

    #11784 Reply

    Zach
    Keymaster

    @Brian: yeah… as someone who gets excited about change, it is quite hard to put myself in those shoes, and i have to remember to try!

    @John: i’ll let @Max do that 😀 and i don’t really know about the default setting for the text, but will look into it.

    #11805 Reply

    MaartenV

    @Max
    I would like to try to put a timeline to the prices of battery packs.
    With improvements of 14% or better, the prices are halved every 5 years.
    The prices mentioned by GM for de Bolt cells ($145/kWh) and Jef Evanson for Tesla battery packs ($190/kWh) gives me the following estimate for the low end. And let’s say that carmakers with less purchasing cloud could be paying twice as much.
    2015 – $200/kWh up to $400/kWh
    2020 – $100/kWh up to $200/kWh
    2025 – $50/kWh up to $100/kwh
    2030 – $25/kWh up to $50/kWh
    Think of this as Moore’s Law for Battery Packs. No reason to think that technology and economies of scale can’t get us there by 2030.
    To me this means that by 2025 nobody in his right mind, and decently advised by family and friends, will buy a car over $20k with an ICE. And that is far earlier than most analysts and petrol CEO’s expect.

    One last thing why I think this can happen. While battery packs are the largest part of the cost of the electric drive train, environmental regulations are the most important in determining the price of ICE.

    #11928 Reply

    Max Holland

    @Zach, you are welcome, and thank you for all your great work!

    I agree with Zach, Bob, Brian and others that the subsidies and other cost savings need to be factored in to truly understand the market trajectory, but thought this raw baseline analysis would be interesting starting point anyway. Not sure how to work the subsidies into concrete figures/trends since they vary greatly in different regulatory environments. Carbon pricing – if/when it happens – will also be a big factor.

    I think Brian’s NYFC is a good point. That’s a main reason why having early halo EVs is so important, and why FormulaE, EV Pikes Peak victories etc. all push the EV image in the right direction (a while back I created a wikipedia page for electric motorsport; please add to/amend it). There will no doubt be a perception tipping point for non-enthusiasts since EVs have inherently better ‘pure performance’ attributes than most ICEs at the same price point. Perhaps sometime soon after the model3 launch (and hopefully similar EVs from others), the non-enthusiasts will start to cotton-on to these aspects.

    @John – on how to do the calculation: there are rough-and-ready assumptions built in here of course (which I would welcome improvement upon). I would encourage you to search for and have a glance over that 2014 academic study I mentioned by Kochhan et al. ‘An Overview of Costs for Vehicle Components’ (you should be able to find a non-paywall version) – it has some good charts which break down manufacturing costs. You may uncover more recent research that sheds more light. The main assumption I made is that – if you exclude the battery – the manufacturing cost of an EV is actually only 85% of an ‘otherwise-identical’ ICEV. This is mainly because electric motors are more simple and inexpensive to produce than transmission + ICE + exhaust system etc. It’s not a simple matter to do an exact comparison of these costs (nor qualify ‘otherwise identical’), but as volume and economies of scale improve, 85% seemed a reasonable assumption. That results in 15% ‘left’ for battery cost.

    This then means that – at a given price point – you allow 15% of that price to pay for the battery. What this 15% will afford you depends on the capacity of the battery (number of kwh), and the battery cost ($/kwh). My calculations per-price-point derive from this. I allowed for two broad sets of battery size (200 & 100 mile range), and for the sake of simplicity, assumed 50kwh and 25kwh for those ranges (oversimple obviously, but okay as a ballpark). Given the foregoing assumptions, it’s relatively easy to see that the battery price per kwh is the remaining relevant figure, giving us the results I laid out.

    @Maarten – I mentioned that Zach’s recent battery cost update article inspired me to do these calculations, and I appreciate your summary of the potential battery cost timeline. I agree that there is a kind of Moore’s law for kwh/$, which is influenced by both chemistry improvements (mostly gradual, occasionally step-change) and process/scale improvements (think gigafactory). I think Musk and Straubel are correct to focus mainly on process/scale and to count on only gradualism on the chemistry side (they would of course love step change improvements, but don’t need them for the business case).

    More – @Zach, I feel that (at some point) having some updatable primers on one or two of these kinds of fundamentals would be of great value to your readership and audience. You might make them wiki-able by senior members. One key topic I have briefly researched is the resource-political-economy implications of moving from fossil fuels to batteries (limited mainly to oil vs. ICEV batteries). I’ll post that shortly as a different topic in the parent forum; basically moving to EVs should allow orders-of-magnitude better democracy/peace compared to the military adventurism, violence and resource-curse that has accompanied fossil fuels.

    Finally – apologies to everyone for the delay in replying – my main work is as a social theorist, so I’m not able to devote as much time to the cleantech/EV revolution as I’d like to. All the more grateful then that we have great guys like Zach making such excellent contributions in this area! (Zach – it would be good to have an occasional channel of communication; please feel free to use my email to make contact).

    #15641 Reply

    Joanneged

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