EV Battery Prices Set to Plunge
Prices of electric cars look set to plunge in the coming years as the most expensive component – the battery systems — get ever cheaper.
A report in Ward’s Auto indicates that EV battery prices have been falling faster than expected and could be lower than US$100/Kwh by 2020. At the moment, the batteries in a Chevy Bolt cost US$145/Kwh. Should costs fall, as predicted, this would mean a potential price drop of US$4,000 per car.
This could well be an underestimate, with a recent forecast that Chinese manufactured batteries could drop in price this year. Morgan Stanley analyst Shawn King said in a note: “According to Gaogong Industry Institute, some EV makers in China have proposed that battery vendors cut prices by 35-40% in 2017. Our China analyst Jack Lu sees this proposal as likely to proceed, as some battery vendors in China could still make a decent profit after such a cut.”
The implications for the EV industry are profound. Such substantial cuts in costs will inevitably boost electric car sales, and with it put pressure on government and manufacturers to install the necessary infrastructure.
At the moment the EV market share in the USA stands at around 1%, but this could rapidly hit the 10% mark should battery prices drop below the US$100/Kwh mark, predicts Ward’s correspondent John McElroy. That would translate into 1 million vehicles a year in the USA alone.
Again, this could be a conservative estimate. Even at present battery prices Tesla has already taken US$1,000 deposits from 400,000 people for its latest model. Tesla itself has predicted a 30% price cut for its proprietary batteries by 2020 once its new ‘Gigafactory’ is completed.
Such forecast price cuts are hugely important if the world is to reach its Paris Agreement carbon targets. Emissions related to road transport remain high and are continuing to increase. In the EU, they account for one fifth of total carbon emissions and it is the only sector where emissions are still growing.
If the Paris Agreement is to be met nations will have to follow the example of Norway, where EVs already have a 40% market share. Price conscious consumers will need to be convinced that being good for the planet is not necessarily bad for the wallet.