View attachment 727441
BloombergNEF’s annual battery price survey finds prices fell 13% from 2019 Hong Kong and London, December 16, 2020 – Lithium-ion battery pack
about.bnef.com
Did we miss this blog when it came out last December? There's very important information here that helps to explain the rush to EVs in the present moment.
Specifically, BNEF was reporting in 2020 that $100/kWh packs we starting to emerge in the battery market even though the average pack level cost was $137/kWh in 2020. The low cost chemistry was LFP with cell cost at $80/kWh. If you couple that with a pack for $20/kWh, you can get to a full pack level cost of $100/kWh.
Or if you are Tesla, you figure out how to build a structurally integrated pack design that has no incremental cost to the cost of the vehicle. In this case cell cost alone is all that matters. Thus in 2020 Tesla could have found its way to $80/kWh pack level cost. This explains how Tesla now has an enormous appetite for LFP cells and is queueing up supply ASAP.
Tesla and other EV makers have already crossed the magic $100/kWh threshold, and the EV market is exploding.
This illustrates the problem with BNEFs methodology which reports the average battery cost at $137/kWh in 2020. It's the marginal, lowest cost batteries that drive the industry, not the older, more costly batteries still in play that hold up the average. Of course, BNEF can "see a path to $101/kWh by 2023" because cheaper new entrants are already in the market. Bringing down the average is simply scaling up cheaper cell, and relegating the more expensive batteries to an ever smaller share of the market. Certainly as the market shifts to a cheaper mix of existing battery option, the technology and manufacturing efficiencies will continue to improve as well. So newer, cheaper, more compelling batteries will keep arriving each year.
In my view BNEF's methodology should focus more on the lowest cost entrants. For example, report out the average costs for the cheapest 10% battery packs currently in production. The cheapest 10% in one year has the potential to triple, quadruple or more in the coming year. So the economics of the most competitive 10% tells you where the industry is headed. Meanwhile the the least competive 50% of the current market will decline substantially. For example if the battery supply doubles, what was the most expensive 50% likely falls to 25% just by volume doubling, and below 25% by being replaced by cheaper alternatives. So the most expensive 50% of the battery tells you what is now obsolete or very niche (e.g. expensive, but small hybrid batteries).
Bottom line, the sub $100/kWh EV battery has arrived and is massively scaling up in 2021. We should look forward to BNEV updating this report in December 2021. I have a hunch the will have to move up their $100/kWh target date yet again from 2023 to 2022. A couple of years ago they had a target date of 2026, which they seem to walk back a year each year. Eventually, they'll have to stop this walk back from overly "conservative" forecasts because $100/kWh will have arrived. 2022 is going to be a brutally disruptive year for automakers and oil industry. The disruption that people thought would happen after the magic threshold in 2026 is happening now.
