EV Battery Packs ~50% Cheaper Than In 2016

Published on December 14th, 2020 | by Zachary Shahan

December 14th, 2020 by Zachary Shahan

The tough thing about analyzing what is happening in the electric vehicle industry is that we tend to be static thinkers — we see how things look today and it is hard for us to see that they can change dramatically. This is even more so the case when what we see today is also more or less what we’ve seen for decades while what is coming tomorrow is dramatically different.

This is one big reason analysts and Wall Street got Tesla so wrong for so long — it was too hard to see and believe where Tesla was headed.

But Tesla isn’t the only company riding the technology improvement wave we’re on right now. Indeed, as I’ve pointed out, while Tesla was improving the Model S by leaps and bounds and bringing the lower-cost, significantly improved Model 3 to market, even Nissan was scaling mountains — tripling the range of a LEAF within a decade.

Every automaker that has been producing electric vehicles for a handful of years has an EV on the market now that has oodles more range than their EVs from 2011, 2013, or 2015.

In fact, a graph from the International Energy Agency (IEA) that I recently discovered shows the essence of what has happened, of what has pulled electric cars across the market from the 3rd division to the 1st division (to use a sports metaphor that is wholly inappropriate here).

You can explore the interactive version of the graph here. The key point I’m highlighting today, though, is that the IEA estimates, among other things, that the cost of an automotive EV battery pack was $293.4/kWh in 2016 but $156/kWh in 2019. Assuming the cost dropped a bit more in 2020, we’re sitting at a 2020 EV battery cost that is about 50% of a 2016 EV battery cost.

Credit: Evolution of Li-ion battery price, 1995–2019, by IEA. 2016 price of $293.4/kWh highlighted.

Credit: Evolution of Li-ion battery price, 1995–2019, by IEA. 2019 price of $156/kWh highlighted.

When you cut battery costs in half, you can offer a lot more range in an electric vehicle or you can cut the vehicle’s price by an enormous amount. This trend of the past several years is why we have truly competitive electric vehicles now arriving on the market. See:

The thing to keep in mind, which I warned about at the top, is that this is not the end of the story. There’s a decent chance the battery price trend you see above continues, with prices in 2025 being much lower than prices in 2020. If that’s the case, think about how much better a 2025 Model 3 will be than a 2020 Model 3. Think about a future Volkswagen ID.3 versus a future Volkswagen Golf. Think about a 2024 Renault Clio vs. a 2024 Renault ZOE. Think about a 2024 Ford Mustang Mach-E versus a 2024 Ford Escape.

If the lithium-ion battery price trend continues, electric cars are going to go far beyond “cost-competitive” into demolishingly cheap. While EVs will have similar or cheaper upfront costs as gasoline and diesel vehicles, they will also offer far lower operational costs.

The battery price drop is not a given. I’ve written and talked at length about the risk of insufficient mineral mining. It’s not clear how soon that will get resolved and on what terms.

Though, while mineral supplies may make some of us nervous, Tesla did present a bullish, lengthy, broad battery plan at its recent Tesla Battery Day event. It clearly sees ongoing cost and price reductions down the road for its batteries. So, at the very least, it seems that Tesla is ready for the future. We’ll see about the others.

The Electric Car Cost Tipping Point

I drafted a graph earlier in the year that basically tells the story of what we’re seeing in this industry. Have a look:

Battery costs will most likely continue dropping. Electric cars will continue to fall in price. Stay tuned to CleanTechnica as we continue to track these trends down their respective curves.

About the Author

Zachary Shahan is tryin’ to help society help itself one word at a time. He spends most of his time here on CleanTechnica as its director, chief editor, and CEO. Zach is recognized globally as an electric vehicle, solar energy, and energy storage expert. He has presented about cleantech at conferences in India, the UAE, Ukraine, Poland, Germany, the Netherlands, the USA, Canada, and Curaçao. Zach has long-term investments in NIO [NIO], Tesla [TSLA], and Xpeng [XPEV]. But he does not offer (explicitly or implicitly) investment advice of any sort.

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