The long road to EV competitiveness

Battery prices have fallen, but EVs are nowhere near price parity

A few days ago Bloomberg New Energy Finance published a graph suggesting that the long trend of falls in the price of batteries for electric vehicles has now bottomed out.

However, BNEF says that battery pack prices are going to fall further from today’s $137/kWh – to $101 by 2023 and to $58 by 2030. The 2023 figure is a bit odd, as it represents a reacceleration of the price decline - BNEF are nothing if not optimists about renewable technologies. The second figure represents a hoped-for new technological breakthrough: read a little further, and you discover that “one possible way that price could be achieved is the widespread production of solid-state batteries, which BNEF estimates could be made for 40% the cost of current lithium-ion batteries.” That would be nice, but speculation about what eventual manufacturing costs of technologies that have not yet made it off the lab bench - particularly ones described as "incredibly expensive to manufacture" - is no basis for policy decisions.

BNEF describes $100/kWh as a “tipping point”, after which the price premium of electric cars will disappear. This also seems strange. The price differential between an EV and its petrol equivalent is currently typically over £11,000: for example the cheapest electric Mini costs £28,400, while the cheapest petrol one costs £16,400. But the prices of batteries have fallen so far that they now represent as little as 25% of the cost of the vehicle: we might expect the Mini’s battery pack to cost £7000. But this is less than the price differential on the whole vehicle. In other words, even if you could get the batteries for free, the EV would still be more expensive than its petrol equivalent. The kind of price reductions that BNEF are talking about in the next few years are going to make a marginal difference only. A £26 grand Mini (or a £23 grand one if the government subsidy remains available) is still going to look very expensive against a £16 grand petrol one.

No doubt this is why the latest wheeze from the Green Blob is a call to start taxing cars at 50%.