GM CEO Mary Barra was recently asked about profitability targets for the company’s electric vehicle line and said that it’s on track for EV profitability in 2025.
But, frankly, the whole conversation about EV profitability and cost parity doesn’t make a lot of sense, and here’s why.
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Electric vehicle batteries have officially dipped under the critical $100 per kWh price point for the first time.
However, it was for the price of battery packs for electric buses in China.
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Automakers and battery makers have been quite secretive about their battery costs, which have long been believed to be one of the main barriers to electric car adoption.
It’s why it’s surprising to see Dr. Peter Mertens, Audi’s senior vice-president of research and development, disclosing the cost of the automaker’s batteries for the upcoming new generation of vehicles that they are about to launch.
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Tesla doesn’t like to talk about its battery cost as it complicates an already complex supply chain with several suppliers, including long-time partner Panasonic, and new ones like LG and Samsung. But the company felt the need to comment this week following a new analysis of the Model 3’s cost by Jon Bereisa, CEO of Auto Lectrification and former chief engineer of the Chevy Volt program.
Colin Langan, a UBS analyst covering Tesla for the firm, hosted a call with Bereisa to gain some insights for its financial model of the company.
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Tesla’s stock price is up almost 2% in pre-market trading this morning following a new note and “Outperform” rating from Baird financial analyst Ben Kallo. The analyst upgraded his rating on the automaker and increased his price target from $230 to $300 – the stock currently trades at ~$210.
Kallo recently visited Tesla’s factory in Fremont and in a note sent to clients, he commented:
“We believe investor skepticism has significantly increased since we downgraded TSLA on Oct. 6, and although we were concerned about the rate of Model X deliveries, recent data points show production is accelerating, which should drive deliveries and margin expansion throughout 2016. Additionally, we believe TSLA is ahead of expectations on reducing battery costs, and continues to have a significant lead on competing EVs. We would be buyers at current levels.”
By manufacturing its batteries at the Gigafactory, Tesla aims to reduce its cost by at least 30%. Its current cost is unknown, but estimates range from $150/kWh to $250/kWh.
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