The Tesla Battery Pack Challenge
Perhaps no piece of EV technology is shrouded in more mystery than the Tesla battery pack. It's not the technical details that are a secret; it is its replacement cost.
The Tesla's battery pack is rated at 53 kWh which is enough to power an average U.S. home for 2 days. It is assembled from 6831 individual type 18650 batteries, which are cylindrical cells with about twice the volume of an AA-size battery. They are the same cells used inside laptop batteries. These individual cells are connected together and packaged with a charge controller to monitor and level the charge of the individual cells. Just the wholesale cost for the batteries for that pack would be about $39K assuming a cost of $.74/Wh for Li-ion cells, which I have confirmed with a few Chinese battery suppliers as the typical wholesale pricing for Li-ion cells when purchased in volume.
In addition to the raw cost of the batteries, there is the labor cost of assembling the cells and the cost of the charge controller and housing. It also has a sophisticated arrangement of sensors, microprocessors, and its own liquid cooling system. When you add the assembly labor, controller, and packaging to hold 750 lbs of batteries, my estimate is that this pack costs somewhere in the neighborhood of $50K to manufacture.
Tesla is betting on the improvement in Li-ion technology (currently estimated to be 8% per year) to continue on and eventually get the battery replacement cost down to around $12K. It's not clear if that is Tesla's projected cost, or the replacement cost; they've been very tight lipped on battery replacement costs. Provided Li-ion technology can maintain an 8% annual level of improvement, it will take about 18 years for the wholesale cost of the battery pack to approach $12K.
Automotive margins typically require twice the bill of materials cost as a price the customer ends up paying, and it's usually much higher for replacement parts. Let's just assume that Tesla can live with 50% of gross margin on the battery pack and so in order for the retail price to get to $12K, it would require yet another 9 years for the battery replacement retail pricing to get to this mythical level that some might consider a 'reasonable' price to pay for replacement batteries. And this assumes a continuous cost reduction of 8% for 27 years, which is almost unheard of except for improvements related to Moore's Law.
Battery technology, unlike semiconductor density which follows Moore's Law, does not improve at 60% per year. A 60% annual improvement is the equivalent of a doubling of the density of semiconductors every 18 months. No phenomenon has more confused the public about the rate of improvement of technology than Moore's Law. It doesn't apply to all technological progress, just semiconductor density. It doesn't even apply to the advancements in solar cell technology, even those are technically semiconductors. Increasing the density of semiconductors has the benefit of lower power consumption for computing tasks only. Moore's Law has very minor effects on the cost and efficiency of electric motors, energy controllers, and batteries. Those components are the major cost drivers in EVs.
The lead acid battery, discovered in 1859, has essentially remained unchanged in terms of its energy density for the past 150 years. It contains about .6% the amount of energy density of gasoline per pound. So 1 lb of gasoline ~ 20,000 BTU = 5.8 kWh = 156 lbs of lead acid batteries. The most amazing thing about lead acid batteries is that they still represent the best value in terms of $/Wh stored (about $.15/Wh) of any rechargeable battery. It explains why, after 150 years, lead acid batteries are still the workhorses for high energy/power applications like uninterruptible power supplies, car starter batteries, solar power storage banks, and other applications where weight isn't so much of an issue.
The lithium-ion battery, which was first used in consumer products starting in the early 1990s, has 4 times the energy density but costs about 5 times as much per watt-hour as lead-acid technology. The lower cost is why lead acid batteries are still used in golf carts and electric car conversion kits, despite the significant penalty associated with adding weight in mobility applications. But when you need 50+ kW-hours of energy storage to make an EV's range competitive with internal combustion vehicle, the weight of lead acid batteries becomes too high to consider. A Tesla's 53 kWh battery pack would weigh over 3,500 lbs. if it was made with lead-acid batteries and the extra weight it added would cut it's the Tesla's range in half. Adding heavy batteries in a mobility application becomes a vicious, self-feeding cycle. This article originally appeared here at EV Authority.
Tesla has not made any specific projections about when the car will need its first battery replacement but based on my experience with laptops and digital cameras which use the same lithium-ion battery technology, I would not be surprised if a Tesla would need a battery replacement every 4 to 5 years. At the time the first replacement is needed, even if sold at Tesla's cost, the battery would be about $34,000 based on my assumption that Tesla's current battery pack cost is in the $50,000 range. This projection also assumes that the battery costs continue to decline at about 8% per year. And for Tesla to remain profitable, the MSRP price should really be about twice that amount, or $68,000. And if lithium battery costs don't continue to drop in price, or demand for lithium ion based batteries increases beyond the industry's ability to supply it, then all bets are off as to what it might cost Tesla's owners to get a fresh battery pack when they've worn out the first one.
The Tesla's battery pack is rated at 53 kWh which is enough to power an average U.S. home for 2 days. It is assembled from 6831 individual type 18650 batteries, which are cylindrical cells with about twice the volume of an AA-size battery. They are the same cells used inside laptop batteries. These individual cells are connected together and packaged with a charge controller to monitor and level the charge of the individual cells. Just the wholesale cost for the batteries for that pack would be about $39K assuming a cost of $.74/Wh for Li-ion cells, which I have confirmed with a few Chinese battery suppliers as the typical wholesale pricing for Li-ion cells when purchased in volume.
In addition to the raw cost of the batteries, there is the labor cost of assembling the cells and the cost of the charge controller and housing. It also has a sophisticated arrangement of sensors, microprocessors, and its own liquid cooling system. When you add the assembly labor, controller, and packaging to hold 750 lbs of batteries, my estimate is that this pack costs somewhere in the neighborhood of $50K to manufacture.
Tesla is betting on the improvement in Li-ion technology (currently estimated to be 8% per year) to continue on and eventually get the battery replacement cost down to around $12K. It's not clear if that is Tesla's projected cost, or the replacement cost; they've been very tight lipped on battery replacement costs. Provided Li-ion technology can maintain an 8% annual level of improvement, it will take about 18 years for the wholesale cost of the battery pack to approach $12K.Automotive margins typically require twice the bill of materials cost as a price the customer ends up paying, and it's usually much higher for replacement parts. Let's just assume that Tesla can live with 50% of gross margin on the battery pack and so in order for the retail price to get to $12K, it would require yet another 9 years for the battery replacement retail pricing to get to this mythical level that some might consider a 'reasonable' price to pay for replacement batteries. And this assumes a continuous cost reduction of 8% for 27 years, which is almost unheard of except for improvements related to Moore's Law.
Battery technology, unlike semiconductor density which follows Moore's Law, does not improve at 60% per year. A 60% annual improvement is the equivalent of a doubling of the density of semiconductors every 18 months. No phenomenon has more confused the public about the rate of improvement of technology than Moore's Law. It doesn't apply to all technological progress, just semiconductor density. It doesn't even apply to the advancements in solar cell technology, even those are technically semiconductors. Increasing the density of semiconductors has the benefit of lower power consumption for computing tasks only. Moore's Law has very minor effects on the cost and efficiency of electric motors, energy controllers, and batteries. Those components are the major cost drivers in EVs.
The lead acid battery, discovered in 1859, has essentially remained unchanged in terms of its energy density for the past 150 years. It contains about .6% the amount of energy density of gasoline per pound. So 1 lb of gasoline ~ 20,000 BTU = 5.8 kWh = 156 lbs of lead acid batteries. The most amazing thing about lead acid batteries is that they still represent the best value in terms of $/Wh stored (about $.15/Wh) of any rechargeable battery. It explains why, after 150 years, lead acid batteries are still the workhorses for high energy/power applications like uninterruptible power supplies, car starter batteries, solar power storage banks, and other applications where weight isn't so much of an issue.
The lithium-ion battery, which was first used in consumer products starting in the early 1990s, has 4 times the energy density but costs about 5 times as much per watt-hour as lead-acid technology. The lower cost is why lead acid batteries are still used in golf carts and electric car conversion kits, despite the significant penalty associated with adding weight in mobility applications. But when you need 50+ kW-hours of energy storage to make an EV's range competitive with internal combustion vehicle, the weight of lead acid batteries becomes too high to consider. A Tesla's 53 kWh battery pack would weigh over 3,500 lbs. if it was made with lead-acid batteries and the extra weight it added would cut it's the Tesla's range in half. Adding heavy batteries in a mobility application becomes a vicious, self-feeding cycle. This article originally appeared here at EV Authority.
Tesla has not made any specific projections about when the car will need its first battery replacement but based on my experience with laptops and digital cameras which use the same lithium-ion battery technology, I would not be surprised if a Tesla would need a battery replacement every 4 to 5 years. At the time the first replacement is needed, even if sold at Tesla's cost, the battery would be about $34,000 based on my assumption that Tesla's current battery pack cost is in the $50,000 range. This projection also assumes that the battery costs continue to decline at about 8% per year. And for Tesla to remain profitable, the MSRP price should really be about twice that amount, or $68,000. And if lithium battery costs don't continue to drop in price, or demand for lithium ion based batteries increases beyond the industry's ability to supply it, then all bets are off as to what it might cost Tesla's owners to get a fresh battery pack when they've worn out the first one.
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