December 7th, 2018 by Steve Hanley
At the Stanford Global Energy Forum last month, Lei Zhang, founder and CEO of Envision Energy, made an extraordinary pronouncement. He said the cost of manufacturing EV battery cells would fall below $100 per kWh by 2020 and would be less than $50 per kWh by 2025 according to Driving, a Canadian automotive news site.
The conventional wisdom is that when the price for EV battery cells falls below $100 per kWh, that is when electric cars will become price competitive with conventional cars and the EV revolution will go into hyperdrive. We can’t know for sure, but many industry observers believe Tesla is very near that threshold for the battery cells it manufactures at its Gigafactory 1 in Nevada, if it has not already crossed over it. In general terms, the current industry standard for EV battery cells is believed to be $145 per kWh. Battery pack prices are believed to be around $190 per kWh.
Not only would cheaper batteries give a jolt to EV sales, it would make it possible for auto manufacturers to actually make a decent profit on electric cars. Once that happens, they will have no more excuse for holding on to their dream of building cars with internal combustion engines the way a person who has fallen off a cruise ship in the middle of the ocean holds on to a life raft.
Arun Majumdar of Stanford began the forum with a prediction that sub-$100 per kWh prices would not happen for 5 to 7 years. The panelists were taken aback when Lei countered that it would happen within 2 years. Does he know something the others do not? Envision bought the former AESC battery business from Nissan when the car maker decided to stop building its own battery cells and source them from LG Chem instead.
Battery research is proceeding at a furious pace around the world. Perhaps Lei has a reason to be so optimistic thanks to proprietary information available to him and him alone. Unlike Tesla, which has gone full speed ahead to create its Gigafactory, most of the world’s automakers have shied away from manufacturing their own battery cells. The fear is that an investment in a factory now using today’s battery technology could backfire if newer technology becomes available in a few years and makes current batteries obsolete. Better to let battery companies take that risk, the reasoning goes.
That may be so. A lot of smart people with decades of manufacturing experience have examined the issue from all sides and decided it is better to source battery cells from a supplier now than get left holding stranded assets later. Only Tesla is bucking the conventional wisdom. Somebody is going to hit the battery jackpot somewhere down the line and be in a position to reap significant rewards. Who is your money on, Tesla or the other guys?