Model 3

How Soon Can Tesla Get Battery Cell Costs Below $100 per Kilowatt-Hour?

edited November -1 in Model 3
This is a link to an article from March 15, 2016. A couple of weeks or so prior to the Model ☰ Reveal Part I. It is a pretty good article. Below are my thoughts on it.

How Soon Can Tesla Get Battery Cell Costs Below $100 per Kilowatt-Hour?
https://www.greentechmedia.com/articles/read/How-Soon-Can-Tesla-Get-Battery-Cell-Cost-Below-100-per-Kilowatt-Hour

I think it was some time in 2014 that Elon Musk noted he would be sorely disappointed if it took a decade to get their internal cost to $100 per kWh. Yes, some speak of cost per battery cell, while others are specific to battery packs. It is definitely best not to mix the terms, but some are not so specific as to which they mean. I figure that ambiguity is introduced on purpose.

Over the last three years or so, I have seen articles that claimed Tesla's internal cost was as much as $240 per kWh, and as low as $180 per kWh. This is the first indication I have seen that their internal cost might be as low as $150 per kWh at the pack level, already, ahead of Gigafactory production. I think Elon has been careful not to say either 'pack' or 'cell' in his statements -- not that it matters much, as traditional automobile manufacturers had been saying they cost around $500 per kWh. That had prompted me to think perhaps they were getting their automotive battery cells from LexCorp, perhaps.

Only very recently has General Motors let slip their cost at the battery cell level is $145 per kWh, which apparently angered LG at its public revelation. According to this article, that means GM would be paying perhaps $174 per kWh at the pack level to supply the Chevrolet BOLT. Thus, it's 60 kWh battery pack represents roughly $10,440 of the build cost for that $37,495 EV.

If the rumored amounts for Tesla are at the pack level though, things are a bit different. Because Elon has been positive for quite some time now that the absolute minimum reduction in their internal cost would be 30% from the outset. So, even if their cost had been as much as $240 per kWh, they would be reduced to 160 kWh instead -- $14 less per kWh than for Chevrolet BOLT at its best. Meaning a 60 kWh battery pack would be only $9,600 as an installed cost within a $35,000 car.

Even happier for Tesla, if their internal cost is as low as $180 per kWh already, a further 30% reduction would result in a $120 per kWh immediate cost through the Gigafactory. Making a 60 kWh battery pack cost them only $7,200. And if as this article suggests, Tesla's current pack level pricing is as low as $150 per kWh already, that means a 1/3rd reduction would put them at $100 per kWh from the very moment the first Model ☰ battery pack arrives at Fremont from the Gigafactory. Making a 60 kWh battery pack cost only $6,000 -- that's a $4,440 savings compared to GM's operation -- and pretty much absolutely guarantees profitability for the Model ☰ even if Tesla chooses to stuff the largest conceivable battery pack into its frame that they can manage at a $35,000 price point.

Since the Model ☰ Reveal Part I in late March 2016, Elon has said he does not foresee a need for an entry level vehicle below that car in their lineup. So, all those who have been hoping for an analog to a Toyota Corolla, Volkswagen Golf, Ford Focus, Chevrolet CRUZE, Hyundai Elantra, Kia Forte, Honda Civic, Nissan Sentra, or whatever can just forget about it... Along with those who practically demanded a short range 'cheap car' built like a Ford Fiesta, Chevrolet SONIC, Nissan VERSA, Hyundai Accent, or Kia Rio. The Model ☰ should be able to hold its own in worldwide sales, not just against direct competitors such as Acura TLX, Alfa Romeo Giulia, AUDI A4, BMW 3-Series, Cadillac ATS, Jaguar XE, Infiniti Q50, Lexus IS, and Mercedes-Benz C-Class... But also against those cars that will certainly move further up-market in the coming decade, such as Toyota Camry, Honda Accord, Nissan Altima, Chevrolet MALIBU, Ford Fusion, et al. All this, while simultaneously eating away at the higher end cars like AUDI A6, BMW 5-Series, and Mercedes-Benz E-Class.

This is going to be beautiful to behold.
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Comments

  • edited December 2016
    "General Motors rattled the electric vehicle world on October 1st when they announced that the battery cell costs inside the new Chevrolet Bolt was an “industry-leading” $145/kWh from its annual Global Business Conference. The declaration was significant for a couple reasons. For starters, it is unprecedented for any automaker to actually disclose specific battery pricing. Secondly, that confirmed $145/kWh price-point ended a long standing argument on how price competitive 2nd generation plug-ins could be, and just how low today’s battery costs actually were."

    Tesla said $190/kWh for it's upcoming battery.

    So $100 kWh does not seem far off
  • edited December 2016
    Here is an interesting link showing Tesla's most current pricing lead in batteries using their new generation cells in the Powerwall. If the ratio holds for car packs ... which would be reasonable ... Tesla could be below $100 now. I actually doubt they are quite that low, but they are clearly way ahead of the rest!

    https://electrek.co/2016/12/01/tesla-battery-cost-chart/
  • edited November -1
    Wasnt it estimated about another 7 or so years (2025) that it will reach $100/kWh?
  • edited December 2016
    No. 2020
  • edited December 2016
    These stories seem to overlook an important point here. Tesla is offering to replace/upgrade older P90D battery packs with new P100D battery packs for $20000. They claim that the old packs will need to be recycled implying that they have no real value. This then implies that they are making 100 KWhr batteries and installing them into cars at a profit at $20000 a shot! That is $200 per KWhr including removal of the old battery, recycling the old battery, building a new battery pack, installing a new battery pack, and profit$$, Their cost for the batteries can't be much more than $130 per KWhr. This is before the cost improvement expected from the Gigafactory. I would also assume that there will be a significant profit markup on the powerwall 2. These are going for $5500 for a completed unit including the inverter (~$2000), the cooling system (~$??). I would guess that the remaining cost on the battery would also be $130 /KW.Hr or less.
  • edited November -1
    I would caution against comparing $/kWh of stationary storage battery packs with the $/kWh of units in automotive application. They are both large lithium-ion batteries but completely different industries with different safety and performance requirements.
  • edited December 2016
    "recycling the old battery"

    Recycling is not a cost, but rather a reduction in cost. A large portion of the battery cost is raw materials.

    Thank you kindly.
  • edited December 2016
    It's important to note that the Tesla $190 quote was in response to an analyst who claimed GM's battery packs were about $188 / kwh back in April, and Tesla's were $260 / kwh. Jeff Evanson, VP of Tesla Investor Relations, responded that Tesla's prices were "already below $190 / kwh".
    I read this not as a statement of cost ("Our battery packs are actually $189.99 / kwh, but I don't want to give an exact number so I'll say 'below $190'"), but as a rounded response to the GM estimate ("GM's cost is about $190 / kwh, and ours are already below that"). Heck, Tesla's costs at that time could have been $150 / kwh; his statement sets a maximum cost, but says absolutely nothing about the actuals. I think we'll find out eventually that Tesla's costs are remarkably low. As this analysis mentions:
    https://cleantechnica.com/2016/04/27/tesla-model-3-pricing-battery-pricing-unveiled/
    "requiring old methods for estimating battery costs be thrown out the window".
  • edited November -1
    You have to also look at the battery chemistry. GM's batteries could be less $/kWh than Tesla because they use an inferior battery chemistry which would cost less per kWh.
  • edited November -1
    +1 Frank99
  • edited December 2016
    @nadurse

    While Powerwall and Automotive uses seem dissimmiliar.
    The comparson with Powerwall is very apt.
    As the difference between Powerwall 1 and 2 is important as the Powerwall Gen 1 uses the (old format) sized cells 18650s and older battery management systems [simitlar to what the Telsa MS and X had in them prior to the 100 kWh battery packs]. .

    The Gen 2 uses the new 2170 size with newer battery management system, the same technology which the M3 will get.

    So the relative performance improvement between Gen 1 and Gen 2 indicates the edge Tesla has in cell production and getting costs down at both cell and pack level.

    For the Powerwall Gen 2 its doubled the battery storage capacity for a similar end user price, and now comes with inverter built in as well.

    So whatever $/kWh battery cost and assembled battery packs cost models those analysts have been using, they're obviously totally out of touch with Teslas current reality.
  • edited November -1
    I figure GF-01 needs to get production to approach 30-50% of full capacity (good chunk of The Great Ramp Up) before they'll see a big drop in cost. Once they get really going they will achieve incremental savings regularly.
  • edited November -1
    JeffreyR: I remind you that Elon Musk has consistently said Tesla's internal cost will drop by 30%, as a minimum, from the outset. The very first automotive battery packs produced at the Gigafactory will already cost significantly less than those currently made at Fremont. Elon has also said that the initial drop might conceivably be as much as 50%. I think it likely myself.

    No need to reach anywhere near 'full capacity', as it was noted some time ago that Gigafactory #001 now had three times the original maximum output as a goal by 2020. Thus, saying that Tesla would see no 'big drop in cost' until they had 30%-to-50% of the new total is just like giving credence to the Naysayers who claimed not a single Model ☰ would be Delivered until after the Gigafactory was finished in 2020. It is entirely contrary to what Elon has said all along, and effectively calls him a liar.
  • edited December 2016
    'Solid Energy' has said it is in discussion with battery end-users with it's new lithium air electrolyte. Claims include improved energy density, temperature range, charge time and safety. Has Tesla addressed this potential leap in performance? Their production schedule for car batteries was stated for early 2018.
  • edited December 2016
    I'm pretty sure that anyone who thinks they have a better car battery, and has working cells rather than PowerPoints, has sent them to Tesla for evaluation. And I'm sure that Tesla has a group that does nothing but evaluate batteries.
    After reading Tech blogs for more years than I care to admit, people with blockbusting "better" batteries hit the press about every two months, and then disappear. It seems that it's easy to improve on the capacity of current batteries, but really hard to make them cheap, in volume, safe, and with long lifetimes in real-life conditions.
  • edited December 2016
    janendan: What Frank99 said. Plus, there are certain issues that seem to adversely affect just about any 'battery technology' that is described as 'anythingeth AIR'. In particular, they seem to suffer the same issues as Hydrogen Fuel Cells: they don't work too well in cold temperatures, are subject to lowered performance at high altitude, strange things happen during rain or high humidity, are always 'promising' in the lab but never seem to reach the perceived potential in practice. Plus, there's the added benefit of greatly lowered longevity and the need to remove and replace components rather often, making for waste disposal issues. Tesla tends to use things that have already been proven to be manufactured in large quantities allowing for economies of scale in cost. If this is something that won't be manufactured at all until 2018, it is undoubtedly going to be expensive from the outset, no matter how good it actually is going to be.
  • edited November -1
    I understand the objective criticism, but I was hoping someone else would take a look at it. Also, the Churchill Club did a panel on it, and they seemed tied to Tesla. Then at the end of discussion the Solid Energy guy dropped hint of something big coming soon. While I agree that 'range anxiety' is a mirage, I wonder how Tesla would introduce the advanced technology into the deliveries?
  • edited December 2016
    Tesla is the largest consumer of batteries in the world. If there is a breakthrough in battery technology, they will be at the top of the company's potential sales list.

    Thank you kindly.
  • edited December 2016
    >> I wonder how Tesla would introduce the advanced technology into the deliveries?

    Well, as Tesla provides an 8 year warranty on batteries, once they were convinced the new batteries would work, they'd simply start shipping them on a new, higher-capacity pack. Tesla might announce a 150 KWH pack, at an outrageous price to keep the number they sold down, and they'd sell them and follow their performance closely before rolling them out to the entire fleet.
  • edited December 2016
    "GM recently showed a slide that said that its lithium-ion battery costs are down to about $145 per kilowatt hour, Hybrid Cars says, citing comments General Motors made at its Global Business Conference in Michigan. The company also showed that these costs may drop to $100/kWh by 2021. Heady stuff considering that Tesla Motors has said it'd hit those cost levels in 2020, and Tesla is not outsourcing the job like GM is (LG Chem makes the cells for the 2015 Spark EV and the Chevy Volts) . General Motors representatives confirmed to Autoblog that GM executive Mark Reuss presented the battery-cost estimate slide in a presentation at the conference."

    http://www.autoblog.com/2015/10/08/gm-li-ion-battery-cost-per-kwh-already-down-to-145/
  • edited December 2016
    An interesting read from March 2016:
    https://www.greentechmedia.com/articles/read/How-Soon-Can-Tesla-Get-Battery-Cell-Cost-Below-100-per-Kilowatt-Hour

    Some quotes:
    "Kallo suggests that Tesla "could reach its <$100 per kilowatt-hour target in the intermediate term as Gigafactory production ramps.""
    "GM sees its battery cell cost hitting $100 per kilowatt-hour in 2022. (GM is quoting cell cost, while Kallo is talking about battery packs. "

    Note that JB Straubel was predicting $100 / kwh "by the end of this decade". Of course, that was back in June 2015, before the Model 3 reveal, and before the acceleration of the Gigafactory and Fremont.
    http://www.hybridcars.com/tesla-projects-battery-costs-could-drop-to-100kwh-by-2020/

    I think the industry is going to blast through $100 / kwh "soon" (I'll buy into "by the end of the decade"), on it's way down.

    Exciting times.
  • edited December 2016
    Oops, didn't notice that one of my links is to the same article as the OP. How embarrassing.
  • edited December 2016
    Tesla continuously monitors battery progress and rates each based on its potential. They are way ahead of you and me when it comes to knowing what's coming down the pipe! Due to production efficiencies alone Tesla will continue to be at least 30% lower cost than the competition for the forseable future ... probably more.
  • edited November -1
    @Red Sage
    Good point about "at least 30%" being significant. I was thinking much more than that, but that would not address the OP's $100 milestone.

    GF-01 seems to be going well. Latest video shows construction has doubled footprint. As @RS points out, Elon has tripled capacity estimates for GF-01 too.
    Fremont City approved Tesla's plan to double the main factory.

    The Great Ramp Up is coming and Tesla is going to blow through $100/kWh and keep driving costs down.
  • edited December 2016
    JeffreyR: Hmmm... It seems you are speaking most of the percentage drop, while I am pointing out the timing. I was mainly responding to this part:

    "...GF-01 needs to get production to approach 30-50% of full capacity ... before they'll see a big drop in cost."

    To me, 30% drop in cost with the first battery packs from the Gigafactory, as compared to those sourced from Fremont, qualifies as a 'big drop'. Yes, even if the initial drop isn't to $100 per kWh. Of course, if it turns out Tesla's internal cost is in the $150-to-$152 range right now, that 30% drop will indeed be to $100. I think it is important to note Elon Musk's knowing smile when he commented that he would 'be very disappointed' if it took ten years to reach $100 per kWh when queried about that in 2014.

    Also...? I wrote the Original Post above that started this thread. I'm pretty sure I agree with myself. (bigsmileyfacegrin)
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