Cost for EV Battery Pack to Continuously Drop by More Than 87%

published: 2021-10-08 9:30 | editor: | category: News

Lithium-ion battery is the component with the highest cost proportion for an electric vehicle. Generally speaking, li-ion batteries take more than a third of an EV's cost, or nearly 50%. However, according to the latest statistics,  between 2008 and 2021 , the costs of li-ion battery packs have  been falling  by as much as 87%. In the future, these costs are expected to keep falling.

According to the statistics from the Vehicle Technologies Office of the U. S. Department of Energy (DOE), the cost of an EV's li-ion battery pack was as high as 1,237 USD per kWh in 2008. As of 2021, its cost has already fallen down to 157 USD.

The year 2008 is particularly meaningful because it was the year when Tesla launched its first generation Roadster. Roadster is the first model of its mass produced road vehicle that uses li-ion battery. It is one of the pioneering models for the current EV era.

Over the years, a variety of factors have contributed to the falling costs of batteries. With the collective efforts of battery manufacturers, innovative startups, and traditional automakers, humans have, for the past 10 years, massively progressed in chemical science, manufacturing processes, and battery technologies. Progresses like these  have enabled the costs of batteries to fall over the years, thereby  indirectly boosting their production volume. The mass production of the batteries is also helping to push down  costs  due to the economies of scale.

▲Estimated EV Li-ion Battery Pack Cost's Trend. (Source: Argonne National Laboratory)

Typically, when costs fluctuate, traditional auto makers will not immediately reflect them on their cars' selling prices. However, Tesla is unique. Because Tesla does not conform to the system of the traditional auto dealers, its cars' selling prices are almost always directly linked to their costs. As a result, Tesla's price fluctuation scale tends to be a lot bigger than that of a traditional car maker. It would be difficult to understand Tesla's strategy if we were to only analyze its selling price using the standards of a traditional car manufacturer.

Tesla's pricing strategy has had a surprisingly huge impact in Taiwan during 2019. In March 2019, the Tesla Model S/X's prices nearly plunged by 50% because the cost of its battery dropped. This move had largely dissatisfied the previous generation of Tesla car owners because their Tesla's second-hand car values were considerably reduced. Laughing at themselves, theses Tesla car owners called themselves "the previous generation of cash cow consumers" within internet forums.

On the whole, the selling prices of Tesla's cars had been continuously falling due to their rising capacity and falling costs. However, in 2021, amid the ongoing shortages of components and materials in the supply chain, the prices of Tesla’s cars would rise again. These are rare cases in Tesla's history. For there to be another wave of price cuts in 2022, the two new factories of Tesla would have to operate at their full speed, and the supply chain shortage issues will have to be eased.

For the general public who haven't bought Tesla cars, the ever-falling costs of batteries are quite beneficial. The current prices of EVs are generally getting higher, and an economic Tesla car that is marketed for the average person hasn't appeared. Bloomberg predicts that in 2023,the average li-ion battery's cost might fall to 100 USD per kWh. Based on that estimation, Tesla's car prices are likely to reach below 1 million NTD.

(Photo credit: Dyson)

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