60 vs 75 and Future Battery Pricing

[carter_seattle]

I have been thinking about the choice between 60/75/90 and I wanted to get beyond the typical debates about driving routines, occasional road trips and the merits of being able to skip Superchargers.

Instead, I'm curious about what you all think the future pricing of battery capacity for Telsa cars. Right now the pricing looks like this:

60D → 75D = $8,500 ($567 / kWh)
75D → 90D = $10,000 ($667 / kWh)

Now, most people argue that you should buy as much battery as you can afford and some people also believe that this will provided added protection in against depreciation since it will outcompete a Model 3 at 60 kWh.

But I wonder about this. With the Gigafactory coming online, isn't it likely that the most expensive component of the car (the battery) is going to start getting a lot cheaper? And wouldn't that mean that in a competitive market that the price for battery capacity and capacity upgrades is likely to go down rather than up? Right now, Tesla states that you can upgrade your 60 battery to a 75 for $9k. But who would be surprised if this price came down? If 75 becomes the new floor for Model S capacity and the price of the vehicle comes down, Tesla will HAVE to lower that $9k upgrade price or else no sane 60 owner will upgrade.

Anyway, all of this is making me learn towards buying a 60. I feel like the battery is the most likely part of the car to depreciate rapidly.

 

[787steve]

Your logic seems sound to me. We just ordered a 60. I would love a 90, but I couldn't make the numbers work. The 60 has plenty of acceleration to me. I am past the age of trying to outrun someone at a stop light. The 60 gets up to speed plenty fast, and other than the acceleration and range, we will enjoy all the safety and technological benefits of the top line Model S's.

For us, money was an issue. Another $23,500 for the 90 was out of the question. But paying $20-30,000 more than an ICE was easy. My wife's current Lexus 330 has just over 200,000 miles on it and it has been a marvelous vehicle for us. It cost about $ 45,000, and we have put $20,000 in fuel in it. I can't give an accurate estimate of oil changes, and other maintenance. The bottom line is that if we drive the Tesla as long as we did the Lexus, the total costs won't be that different. And we will be driving in the safest car in the known universe. That easily takes care of the difference. Or maybe I just want it so badly that I am rationalizing.....

 

[cantdecide]

60D → 75D = $8,500 ($567 / kWh)
75D → 90D = $10,000 ($667 / kWh)

Just because Tesla charges this amount doesn't mean that it currently costs Tesla that amount.
Indeed the 60D and 75D cost the same to produce, reportedly, being the same battery and all...
Also remember that the original price difference between 60 and 85 was $10k, which is much cheaper than the above, yet battery prices have not gone up in the last 3 years.
Tesla may well have priced the batteries as though the Gigafactory were already online... perhaps they are break-even right now on the incremental battery size but expect to return to their typical 20% margin once the Gigafactory comes online... we really don't know.

However, I think there is the general expectation of batteries becoming cheaper over time, so they most likely will. I read somewhere that there was a general "Moore's law" type expectation that each year you can build a battery 2% bigger for 2% less cost [for the same battery pack size]. I expect that is the general direction things will head.

 

[TacC]

Elon says density should improve by 5% annually. If you trust him and factor in battery degradation, I think you're on the right track about depreciation.

The other parts of the car (floor mats, tires, etc.) are relatively cheap to replace. The heart of the car is its hardware and software, which makes it somewhat future-proof.

To me, the 60 is an easy choice for owners where range is only relevant on road trips. The other 360 days of the year, you effectively have a 66 - which makes your upgrade effectively $944/kWh. On a separate note, it probably doesn't make sense to upgrade a 60 to a 75 after any considerable degradation because it is unlikely that Tesla would artificially reduce capacity on a 60. It is possible that 15 years from now, a 60 and 75 could be identical in range and performance.

My wife and I would have downgraded from a 75 to a 60 if not for two things. First, it was impossible because we were already in production. Aside from that, we got the free upgrade from a 70 so the value proposition with the 60 was a bit different.

 

[bonaire]

Tesla hired a real battery expert in Jeff Dahn. I would listen to his input on battery density expectations in the future over anyone else. 5% a year is hard to fathom "ongoing". Unless new materials and chemistries are discovered. Using the larger 20700 cell volume over 18650 offers higher density with less packaging materials "on volume". This is the cylinder walls, cap and base, etc. Meaning, a bunch of larger capacity cylinders (including taller by 2mm) will pack in more energy per cubic meter when they come online. A battery will then have fewer, higher capacity cells for an equal or slightly higher capacity for less cost. But then after that, it is suspected only chemistry changes and materials modification can increase density in steps. So far, the density is pretty good and going much more than the current chemistry in 20700 seems unlikely without breakthroughs.

Lithium-Ion Battery Expert Jeff Dahn About To Start At Tesla Motors

Dahn says he is doing the same research as other companies. Low cost, high density, high cycle life. Musk is shooting from the hip offering 5% annual improvement as a swag.