The Future of Battery Electric Vehicles

The July 16, 2015 article entitled, Electric vehicle batteries are getting cheaper much faster than
we expected by Megan Geuss and published by Ars Technica, a trusted source for technology
news and scientific advancements, made rounds in the internet because of its presentation of the
case of the future of Electric Vehicle Battery and its role in the energy market which is currently
dominated by gas companies.
Pioneered by Tesla Motors, Inc. with its announcement to sell stationary storage batteries, the
market has seemed to open more opportunities for more researches and efforts to level the
playing field for Battery Electric Vehicles or BEVs against their still more dominant competitor,
Gas-Operated Vehicles. Consequently, since the concept for Battery Electric Vehicles is also the
same for Stationary Storage Batteries, this development has now also translated to the possibility
of more homes being powered by stationary storage batteries. Tesla seems to gain its confidence
from previous success in the luxury vehicle market despite some peoples skepticism about the
move.
Recent developments allowed for drastic drops in costs for installing Li-ion battery packs. Citing
from the abovementioned article, costs of installing these battery packs in California have
dropped to as much as 20% of its original. Rumors of subsidy from the company exist but it is
common knowledge that Li-ion battery packs have gotten cheaper.
Together with the move to sell, Tesla is also building a massive factory in Reno which can
further contribute to more cost reduction. It is no longer far-fetched to imagine a future where
electric battery packs and their stationary counterparts are already competing against gaspowered cars and generators. What really made it more promising is the rate by which the cost of
producing battery packs for electric vehicles has fallen with actual rates are even lower than
projections with current costs already reaching the 2020 projections.
Nykvist and Nilsson of Stockholm Environment Institute indicate that prices will continue to
further for down at a competitive level enough to reach the point where it can go against gasoperated vehicles. However, they have also admitted that even if prices go down, the competition
will not be seen in the near future. According to them, relative cost is the single most important
factor to consider to see whether Battery Electric Vehicles or BEVs can actually compete against
gas operated vehicles and generators: estimates require price to go below US$150 per kWh in
order for BEVs to become cost-competitive. This implies that for as long as gas operated
vehicles and being part of the energy grid remain to be more cost-effective and efficient, battery
electric vehicles and stationary storage will not be able to compete on a leveled playing field.
The concept of learning rate which is defined as the cost reduction following a cumulative
doubling of production as introduced by Nykvist and Nilsson have further improved the
conduct of analysis for the electric battery market. They have arrived at current rates of around 6
to 9 percent. These rates can still go up as researchers continue to produce results. More
optimistic projections pegged the rates to reach 12 to 14 percent. This indicates further cost
reduction which will ultimately lead to market demand for the product. The National Academy of
Sciences presented a report to address the demand aspect. Since the improvements for BEVs

translate to improvements for battery storage, it goes without saying that the popularity of one
affects the other. Soon, we might be able to see a community running on storage batteries and
people driving BEVs at the same time. These developments in the field of BEVs have attracted
other big car industry players. This means more independent researches will be funded to further
improve pricing and the viability of electric batteries as alternative to gas-powered vehicles.
An article published by The Guardian claimed that electric cars will be cheaper than
conventional vehicles by 2022. The main reason, according to the article, is the plummeting cost
of batteries; this analysis is from Bloomberg New Energy Finance analysts. A more promising
projection is that even with increased efficiency for conventional cars, combined purchasing and
running costs for electric cars would still be lower than costs for conventional cars. This implies
that the cost of electric cars will only go down as costs of electric batteries continue to decrease.
These developments are definitely favorable for EV companies as new advancements and
technologies are developed to further improved the electric car efficiency, durability, and
affordability. With these, Return of Investments or ROIs are bound to be realized sooner than
later. It will be very profitable to be placed rightly in the electric car market before it booms and
become the next big thing in the energy market.
The promise of a bullish market for BEVs and stationary storage units will prompt more
developments of technologies and advances which will seek to address improvements in
efficiency, durability, and other important considerations. Even the most efficient gas-powered
vehicles fall short of the Tesla Motors Model S efficiency; the Model S is listed in UK
Carbuyer as one of the, if not the, best electric car. The best thing about this is it will only get
better with more researches and developments that will continue to attract more investors and
companies.
In the case of producing electric battery packs, the materials would include cathode materials,
anode materials, electrolytes, and separators. There are usually 5 Steps followed in the
manufacturing of batteries. These are Oxide and Grid Production Process, Pasting and Curing,
Assembling of Elements, Filling and Formation, and Charging and Discharging. This is later
followed by quality inspection to avoid product defects from being sold in the market,
Similar to any production, many factors are considered on why electric batteries are priced as
such. These factors include, but are not limited to, materials, labor, and overhead costs, plus
markup for profit. Material costs include the chemicals, labor includes direct and indirect labor,
and overhead costs are the fixed and variable expenses that manufacturers incur. The costs of
materials depend on which variety of Li-ion battery is going to be produced. There are at least 6
varieties of Li-ion batteries, namely, Lithium Cobalt Oxide(LiCoO2), Lithium Manganese Oxide
(LiMn2O4), Lithium Nickel Manganese Cobalt Oxide (LiNiMnCoO2 or NMC), Lithium Iron
Phosphate(LiFePO4), Lithium Nickel Cobalt Aluminum Oxide (LiNiCoAlO2), and Lithium
Titanate (Li4Ti5O12). In the case of electric car batteries, it commonly uses the Lithium Nickel
Manganese Cobalt Oxide (LiNiMnCoO2 or NMC) variant. This variant is said to be one of the
most successful Li-ion variants. It is one of the more expensive variants of the battery. Direct
labor costs include assembly, quality check, testing, and packaging while indirect labor costs

include advertisements, delivery, and other incidental expenses. Overhead costs include factory
maintenance, utilities expenses, and others which are necessary for the continuation of the
operation.
According to the University of Minnesota these costs are further specified into developments
costs, general and administrative expenses, legal expenses, insurance, component costs, quality
costs, services, taxes, selling expenses, assembly costs, packaging, utilities, inventory,
distribution channels, tooling, obsolescence & scrap, waste, warranty, and advertising. These
expenses are incidental for any manufacturing company and they all go into how prices of
products are determined.
It can already be said that the future of energy is in electric batteries. As more efforts are done to
improve the quality of the product and reach levels which would allow more dependence to it
and less dependence on gas-powered products, the world, in the years to come, will change its
ways on how it deals with energy. The time of coal and fuel-dependent economies may come to
an end once the potential of energy batteries for cars, homes, and even industries is realized.