Jefferies Analyst: Tesla To Drive Down Battery-Pack-Level Costs By 70% Via Economies Of Scale, Supply Chain Optimization, Etc

Tesla will drive down battery-pack-level costs by 70% (down to around $38/kilowatt-hour) once the Gigafactory hits peak production via economies of scale, improved chemistry, supply chain optimization, and other factors, according to Jefferies analyst Dan Dolev.

As part of his recent appraisal of the company, the analyst increased his price target for Tesla’s stock up to $365 a share — largely owing to his analysis of the company’s battery business. As company executives have previously forecast a cost reduction of around 30%, the new analysis seems to suggest that that was a very “conservative” estimate (perhaps meant to be greatly exceeded for PR purposes, or simply because so many factors were/are still in the air).

Tesla Gigafactory new 2
Tesla Gigafactory under construction, by Bob Tregilus (CC BY-NC-SA 4.0)


The analyst in question is basing this prediction around an estimation that current Model S battery-pack costs hover somewhere around $250/kWh (kilowatt-hour) — and that the company “can bring the cost of the battery cells down to ~$88/kWh and the pack-level cost to ~$38/kWh.”

Here’s a clip from that:

We believe that Tesla’s use of an efficient nickel cobalt aluminum (NCA) cathode (ie the positive electrode), use of a silicon synthetic graphene anode (ie the negative electrode) that has 2-6x the lithium-ion storage capacity of today’s standard graphite anode, and a possible use of water-based anode solvent, are key advantages. […] Our analysis details a potential path to a 30% cell-level cost reduction to ~$88/kWh by using a more efficient lithium-rich nickel cobalt manganese cathode (vs. NCA), doubling the percentage of silicon in the synthetic graphene anode, replacing the liquid electrolyte with an ionic gel electrolyte which eliminates the need for a separator, and using a water-based electrode solvent for the cathode. The Gigafactory, which is expected to begin production in early ’16, should drive down pack-level costs by 70% to ~$38/kWh via economies of scale, supply chain optimization, increased automation, and production domestication.

As noted by Electrek, that puts things in the sorts of ranges that would probably allow for a very affordable electric vehicle (EV) with a 200–300 mile plus range.

With regard to the estimation that Tesla Model S battery packs cost around $250/kWh at the moment, it should probably be noted here that the company’s Powerpacks are currently selling for around that price — so, presumably it’s a bit lower, but that’s just a guess. Other estimates put Tesla’s battery packs at a cost of ~$200/kWh right now.

One thought on “Jefferies Analyst: Tesla To Drive Down Battery-Pack-Level Costs By 70% Via Economies Of Scale, Supply Chain Optimization, Etc

  1. I read this in other sites, too, and it’s confusing. Is it $88, $38, $88 for cell + $38 to make the pack, $88+$38+X% Tesla mark up, which is it? It seems to be latter, which would put pack price at about $150/kWh with 20% markup. If so, that’s disappointing. Even at $100/kWh, 50kWh battery (200 miles range EV?) would cost $5000, but $150/kWh would make it $7500. Including replacement labor could make it $8500. Very few people spend $8500 to fix a car unless it’s exceptional.

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