Jefferies predicts Tesla will achieve a 50%+ reduction in battery cost by 2020

GvMTFpBIn a new note issued today, Jefferies analyst Dan Dolev increased his price target on Tesla Motors to $365 following a new analysis on the company’s battery business. When Tesla first announced its “Gigafactory“, it forecasted a ~30% reduction in battery cost through economy of scale and improved chemistry, but since then Tesla executives revealed that 30% might have been conservative and Jefferies seems to agree.

Dolev estimates Tesla’s current Model S battery pack cost to be at $250/kWh and he thinks the company can bring the cost of the battery cells down to ~$88/kWh and the pack-level cost to ~$38/kWh. The analyst sees Tesla achieving these cost reductions primarily from chemistry changes for the cells and economies of scale for pack production:

We believe that Tesla’s use of an efficient nickel cobalt aluminum (NCA) cathode (i.e. the positive electrode), use of a silicon synthetic graphene anode (i.e. the negative electrode) that has 2-6x the lithium-ion storage capacity of today’s standard graphite anode, and a possible use of water-based anode solvent, are key advantages. […] Our analysis details a potential path to a 30% cell-level cost reduction to ~$88/kWh by using a more efficient lithium-rich nickel cobalt manganese cathode (vs. NCA), doubling the percentage of silicon in the synthetic graphene anode, replacing the liquid electrolyte with an ionic gel electrolyte which eliminates the need for a separator, and using a water-based electrode solvent for the cathode. The Gigafactory, which is expected to begin production in early ’16, should drive down pack-level costs by 70% to ~$38/kWh via economies of scale, supply chain optimization, increased automation, and production domestication.

At $125/kWh, a 60 kWh battery pack, which could allow for 200+ miles range depending on models, would cost $7,500. Such an improvement would make ~$35,000 electric vehicles a much better value proposition.

Side note: Dolev estimates the current battery pack cost of a Model S at $250/kWh. Tesla is already selling its Powerpack, a commercial/utility-scale stationary energy storage battery pack, for $250/kWh. Although it’s not clear how the cost of a stationary storage battery pack would compare to the cost of a vehicle battery pack.

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Comments

  1. Alan Costello - 7 years ago

    Out of curiosity, where is the image attached to the article from? I’ve never seen an individual cell branded Tesla, I’ve only ever seen them in the green or blue shrink wrap direct from Panasonic. Can they be bought? I’d love something like that to put on my desk. Really cool either way.

    • Fred Lambert - 7 years ago

      I couldn’t trace it back to the original poster, but it was lifted from Reddit, and if I remember correctly, the user said a Tesla representative was handing them out around Tesla’s stage at the Detroit Auto Show earlier this year. I think he said they were shells, not actual cells.

    • qwerty - 7 years ago

      It looks like swag given to auto journalists/bloggers from the 2015 Detroit Auto Show.

      • Fred Lambert - 7 years ago

        if I remember correctly, you are correct.

  2. Chase - 7 years ago

    I can’t believe that they estimate Tesla’s current cell level costs to be $124/kWh. That’s absurdly low. Most of the estimates I’ve heard are somewhere between $150 and $200.

    The idea that Tesla will switch to an NMC cathode also runs counter to what I would expect Tesla to do based on my understanding of batteries. Battery university has a nice chart comparing lithium ion batteries of various cathode materials http://batteryuniversity.com/learn/article/types_of_lithium_ion

    According to them, NCA will probably reach around 300 wh/kg, while NMC will only reach 200. If that’s true then it would make no sense for them to switch to NMC because it would force them to reduce range or increase weight, neither of which are desirable.

    It’s possible that the battery university article is wrong. Their information on NCA, for example, shows an expected cycle life of 500 at a discharge rate of 1C. But we know from spec sheets released by panasonic that the cells used in the Model S retain over 80% capacity after 3000 cycles when discharged at 2C. Source: http://www.teslamotorsclub.com/attachment.php?attachmentid=10719&d=1350500751

    It also runs counter to my understanding to think that Tesla would choose a water based solvent for the anode and cathode. Water based reactions are the primary reason why lead acid batteries only have ~75% round trip efficiency, vs ~90% for a lithium ion battery. It’s possible I’m wrong about this (my knowledge of chemistry is limited), but the salts that ferry lithium ions across the separator are highly reactive, so I don’t see any way that using a water based solvent would decrease parasitic reactions.

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