AlixPartners: ‘battery price at $100 per kWh key to success EV’
At the moment, batteries cost around 140 dollars per kWh. In 2010, that was no less than a thousand dollars. The good news is that at 100 dollars, the total cost for a vehicle battery system will be close to that of the development and production of an internal combustion engine. In other words, electric cars can soon be built at the same cost as ICE cars.
To measure in which way this prediction will change the current reality, you have to look at the long-term context. The last four years were marked by emission scandals and the growing awareness about climate change. This situation has lead to changing environmental laws.
In China, the government encouraged people to buy electric cars. The EU gave the industry CO2 limits, enforced with high penalties. It forced automakers to electrify their cars in an unprecedented way. AlixPartner values the total automotive investment in electrification at 200 billion dollars between 2019 and 2024.
In theory, this should lead to an increase in plug-in vehicles. Their market share should go up from 2 to 3% today, to 15-20% in 2025, and 30-40% in 2030. But consumers will need to follow. And in that context, pricing is essential. Without government support, electric cars today are still more expensive than traditional ICE cars. Batteries represent a third of the total vehicle price.
“Everything seems to line up to lead to a battery price reduction,” says Georgeric Legros, director at the Parisian branch of AlixPartners. “Innovation makes the energy density of batteries 15 to 50% higher, which increases the autonomy at equal weight. The progress in charging speed reduces charging times by 4. Add to that the lower battery cell prices caused by overcapacity in Asian production, and you have all the elements for a downward cycle.”
“It’s a phenomenon we have observed and which already benefits our customers,” confirms Eric Feunteun, an electric vehicle program manager at Renault. “We sell the 52 kWh battery of the new Zoé at the same price as the previous 41 kWh model.” The result is that the best-sold electric vehicle in France now has a third longer (400 km) autonomy for the same price.
“Including state financial support, we now already offer an ICE Clio and an electric Zoé at the same price in a long-term rental,” Feunteun adds. “From 2024-2025, future solid-state technology should make batteries and charge times less sensitive to temperature variations.
One unstable factor could come and postpone or wreck the cheap battery price dream: fluctuations in primary battery commodities. Batteries contain metals, like lithium, cobalt, nickel, manganese, iron, and aluminum.
The trajectory toward the 100 dollars per kWh price drop is based on today’s price of cobalt, nickel, and lithium. AlixPartners has also made a simulation with a reasonable and possible price increase of those critical materials. The cost would then only drop to 110 to 115 dollars per kWh, which is still acceptable. But this would bring the economic advantage of electric cars to a halt.