After reading all the recent news reports about Tesla Motors’ proposed “Gigafactory,” it’s hard not to wonder about the future of battery-electric cars, and how low their costs can really go.
The math of Tesla’s announcement is intriguing. The New York Times reported, “The automaker expects to reduce the per-kilowatt cost of its battery packs by more than 30 percent by the end of the first year of volume production for its third-generation electric vehicle.”
That, of course, isn’t the lowest known prediction for EV battery costs. But it’s a realistic one, and it brings us closer to understanding what the real market for electric cars will be.
Today -- no matter what you may hear -- no one fully comprehends how mass market consumers will react to battery-electric vehicles (BEVs). If you don’t believe that, then consider a 2009 study from the Center for Entrepreneurship and Technology, which predicted that electric cars would hit adoption rates of 80% by 2030. Or consider a separate study by the Electric Power Research Center, which called for 80% by 2050. Or take a peek at the US Energy Information Administration’s recent Annual Energy Outlook for 2014, which predicted that just 1% of vehicles would be electric by 2040.
Those numbers, so wildly divergent, can mean only one thing: No one knows. But the Gigafactory could offer us a more concrete view of the future. Today, of course, only Tesla knows what its 85 kWh pack costs, but a comment on teslamotorsclub.com places the value at $46,000 for a replacement battery. If we reduce that by 30% and cut the battery size in half for Tesla’s smaller third-generation vehicle, then we could possibly see a $16,000 battery from Tesla in the next few years.
While that may sound costly, remember that Tesla’s future battery could still have twice the capacity of a Nissan Leaf battery, and three times that of a Volt. By those standards, $16,000 is impressive.
Still, the question remains: Would the masses buy an electric car with a 200-mile range at $30,000? At $25,000? Or even at $20,000?
Schools of thought on that subject vary. Automotive analyst Thilo Koslowski of Gartner Inc. told us last year that many consumers are willing to pay extra for an electric car, but the additional amount must be small. “Hopefully, by 2025, the differential you’d pay for an electric vehicle versus an internal combustion engine vehicle would be $3,000 to $5,000,” Koslowski said. “That would be the threshold that would open up doors to make EVs a strong presence.”
Many automakers take a slightly different view. One scenario gaining traction in the industry holds that electric cars should be built so they meet 95% of an owner’s range needs, while costing less, so they can be peddled as second cars.
The beauty of the Gigafactory is that we’d get an inkling of whether any of those projections are true. We’d finally see a glimpse of how consumers really think. If the Gigafactory is successful, the auto market could potentially have an electric car, with a longer range than any BEV available today, at a price as low as $30,000, and maybe even lower.
At that point, we’d know. Dealership offices, with their smiling sales people and their stacks of contracts to sign, have a way of bringing us back to reality. When middle-class consumers sit down at those dealership desks in a few years, we’ll see how fast they really reach for their wallets.
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