EV Battery Prices Plunge 89% in Ten Years

Feb 10

Summary - According to Oilprice, the price of a lithium-ion battery pack used to power an electric vehicle has plunged 89% in the last decade, from $1,100 per kWh to $137 per kWh. It could drop even further in the next couple of years, allowing automakers to manufacture mass-market electric vehicles for the same cost as ones that run on petrol. Marine batteries still cost significantly more, ranging between $800-$1,000 per kWh for retrofits to $500 per kWh for newbuilds. DNV expects the cost of batteries to be reduced by 56% by 2025.

During Tesla’s 2020 battery day, it became apparent price of batteries will continue to go down. It is only a matter of time before they are commercially (much) more attractive compared to petrol or diesel engines. It is becoming more and more apparent the impact Tesla, its vision and the creation of there gigafactories have on the energy market. Nonetheless they are not the only ones driving costs down.

Only one way costs will go. Down.

About a decade ago, the cost of a lithium-ion battery pack was around $1,110 per kWh. That figure now stands at roughly $137 per kWh, and likely to plunge to about $100 per kilowatt-hour in the next couple of years, said Fast Company, citing a new clean energy report from Bloomberg.

"If you look at the remarkable cost reduction over the last decade, and what's expected over the next few years, and pair that with escalating policy measures in Europe and expected in the U.S. and China, then you have this very powerful combination of factors to underpin EV uptake, starting now," said the head of clean power at Bloomberg New Energy Finance, Logan Goldie-Scot.

The report cited some Chinese battery packs already cost around the $100 per kilowatt-hour mark - the line in the sand that will allow automakers to make mass-market electric vehicles while turning a profit.

"They will continue and accelerate over the next few years. Within four years, major automakers should be able to produce and sell mass-market electric vehicles at the same price and with the same margin as internal combustion engine equivalents," said Goldie-Scot.

UBS's Swiss investment bank published a note earlier this year that said Volkswagen could be the first global automaker to make money selling electric vehicles with profits materializing as early as 2022. Some have referred to this phenomenon - Volkswagen and other large German car manufacturers moving towards the EV space - as ‘the Tesla Effect’.

Is everyone drinking the Tesla Kool-Aid?

Even though Tesla is the most desired electric vehicle at the moment, it could come under pressure from strong German competition.

"In a head-to-head comparison, consumers would still prefer an electric Audi, BMW or Mercedes over a Tesla. The key issue is that these brands still lack competitive products, which could change in 2021," UBS said.

While gamma squeezes have pushed the market cap of Tesla to $629 billion, the prospects of cheaper batteries and mass-market electric vehicles by mainstream automakers may be a headwind for the company. For the marine industry, it is not the stock price that excites but a simple question: when will their success spill over from land to sea?

Tesla stock in as of February 2021. To infinity and beyond? How long can it last?

Marine batteries are not there (yet)

Marine battery systems are gathered in the top boxplot, averaging between 400 and 850 euros. Land-based systems are currently two to five times cheaper, in some cases almost ten times.

Despite the prices for land-based EV batteries dropping and Tesla stocks going to the moon, marine battery systems are still a decade behind. According to MAN, price for marine batteries ranges between $1000 per kWh for retrofits and $500 per kWh for newbuilds. Future battery prices are likely to go down to $250 per kWh. Other sources from Mr. Sustainability claim the price for retrofits are currently around $800 per kWh and going down rapidly. All these prices however exclude the costs for other parts of the system such as inverters, cabling, installation costs and safety measures which can easily double the costs of the entire system.

Nevertheless, even DNV has picked up the potential of Tesla for the marine industry. After Tesla’s 2020 battery day, DNV expects the cost of batteries to be reduced by 56% (measured in $/kWh) by 2025. On the assumption of success on all fronts, Tesla will achieve the critical battery density for short range electric airplanes – namely 400 Wh/kg with high cycle life.

What does this mean for your vessel? Could marine batteries reduce 30% of your fuel consumption, just as in the case of the North Sea Giant? Comment on the link below to contact us, or look in the insights section on batteries to find the most important technical guides from DNV, Lloyd’s and MAN.