Are Lower Battery Prices Bringing EVs Near Cost Parity With Conventional Cars?

As more and more electrified vehicles enter the world’s auto fleet, and as better battery technologies combine with higher levels of battery production, the cost of storing energy in an automobile continues to plummet.

According to an article by Climate Progress, by some measures, the price – calculated in terms of cost per kilowatt-hour of battery storage capability – has already hit the tipping point at which PEVs become cost-competitive with conventional fossil-fuel automobiles.

In the past five years, for example, the world-wide market – led by the U.S., Europe, China and Japan – has reportedly grown to more than 700,000 plug-in vehicles per year, with a wide range of models, sizes, and price points on offer.

The article says this high level of demand is causing battery prices to fall much faster than experts have estimated.

For example, the International Energy Agency recently is cited as projecting (in “Global EV Outlook: Understanding the Electric Vehicle Landscape to 2020,” published in 2013) that battery costs would drop to $300 per kwh of storage capacity by 2020.

That’s a key price point, according to the Climate Progress article, because experts believe batteries selling at that level would make electric vehicles’ operating costs compare favorably with the cost of operating conventional vehicles driven by internal combustion engines.

But a much newer study also cited in the article, and published last month in Nature Climate Change, titled “Rapidly Falling Costs Of Battery Packs For Electric Vehicles” is said to report that battery cost per kwh fell from more than $1,000 per kwh to approximate $410 per kwh between 2007 and 2014.

Even better, the authors of that study apparently found that leading entries in the market, like the Nissan Leaf and the Tesla Model S, have already broken the $300 per kwh barrier.

As a result, writes Climate Progress, in 2014 investment bank UBS was able to report that, in some countries, the total cost of owning a Tesla Model S is very close to that of an Audi A7.

As oil prices drop, the article suggests that price targets for comparability with electric vehicles will, of course, diminish, perhaps below $250 per kwh. But battery costs are on track to meet or even beat that price point.

Experts believe that batteries will sell for less than $230 per kwh within two or three years. One big reason is that Tesla Motors and Panasonic are investing more than $5 billion in a factory designed to build more than 500,000 battery packs per year at prices 30 percent lower than today’s.

There are also hopes, says Climate Progress, that improved technologies will come on the scene to drive battery prices even lower.