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Electric Vehicle Battery Prices Forced Down by VW

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Demand and deployment for electric vehicles remains low, but automakers tend to agree that the technology could be the biggest shift in automotive technology since the invention of the automatic transmission.

The problem, of course, that electric vehicle batteries are far more expensive than any conventional powertrain. A brand new four-cylinder engine might cost $4,000, while a hybrid battery pack can cost up to $5,000. Electric vehicle battery packs run upwards of $10,000, which explains why the vehicles they are housed in tend to be more expensive. True, the Chevy Volt costs a little under $40,000, but it also only has an all-electric range of under 40 miles. The Tesla Model S, on the other hand, has over six times the range, but also starts at over twice the price. Of course, part of that is probably all the extra toys you get with the Tesla, but a large chunk of that price is the battery pack, 85 kWh compared to the Chevy’s 16 kWh battery.

To get electric vehicle battery prices down, one could go the route that Tesla Motors is going, forcing prices down by increasing the supply of lithium-ion batteries on the market. The Tesla gigafactory, when fully operational, will effectively double the worldwide production of lithium-ion cells. In turn, this will enable Tesla Motors to produce battery packs much cheaper for electric vehicles and energy storage platforms.

Like Tesla Motors, Volkswagen has a single electric vehicle on the market, producing about 30,000 Volkswagen eGolf annually, with a couple more electric vehicles in select markets and in the future. Instead of boosting production, Volkswagen believes that standardization will help drive down electric vehicle battery prices and increase electric vehicle adoption.

The idea is that lithium-ion cell manufacturers generally make cells in three formats: cylindrical, flat pouch, or prismatic (square). One could make the module fit the cell, such as Tesla Motors has done, or make the cell fit the module. This relationship may have doomed, at least not without significant retooling, Tesla Motors to focus solely on cylindrical cells. It’s not like this has hurt the company in any way, but what about when pouch cells are cheaper than cylindrical cells? Volkswagen decided to go another route, by standardizing the module. The modules are adapted to whatever platform has in mind, and the modules can accept whatever cells happen to be cheapest at the time of manufacture. Basically, Volkswagen will let cell manufacturers underbid each other for the rights to put their cells into Volkswagen’s modules.

In the end, we’ll have to see how this plays out, but Volkswagen seems pretty confident. Might we perhaps be seeing the roots of a new competitor for the upcoming Tesla Model 3?

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5 COMMENTS

  1. Tesla also foolishly will make their own batteries. vertical integrated is frowned upon these days. VW leveraged LG, Samsung, Panasonic against each other for best deals…VW knows procurement science, tesla is a hobby for a rich guy, they loose money on every car they sell….it’s unsustainable

  2. “When pouch cells are cheaper than cylindrical cells.”

    Where is the proof for this statement? Tesla Motors has based their entire future on the fact that cylindrical cells are and will continue to outperform other types of cells in pretty much every area for at least the next decade. They have access to a massive amounts of information that we don’t have. I wouldn’t doubt Tesla, especially since they do have the backing of Google. Volkswagen is doing it because they have to deal with many different companies. Their standardized battery box makes it easier for them to stuff whatever batteries they choose into an ICE-based modular platform. In order to meet CAFE regulations, they will eventually offer gas, diesel, hybrid, PHEV, and EV versions of all of their models. Tesla’s skateboard platform is a specialized platform for EVs and is superior in many ways.

    Economies of scale will kick in faster and affect Tesla more than any other automaker since they are using the most batteries by FAR. For every vehicle, Tesla uses quite a few thousand battery cells, versus the few hundred pouch or prismatic cells in a competing EV. To illustrate Tesla’s vast economy of scale advantage let me give an example. For every 1,000 Leaves that Nissan makes, they use 240,000 prismatic cells. In contrast, for every 1,000 Model S’s Tesla makes, they use 7,104,000 cylindrical cells. Tesla’s number of cells is nearly 15X larger.

    • VW is a car mfg. The Tesla company is a low volume, company, and a rich guy’s hobby. VW knows that making and selling million$ of vehicles, is what causes pricing and stuff to drop, and quality to go up. ABS was thousands, mass produced it is now like costing $128 a car for mass produced vehicles. Same as back up cameras, fuel injection, and hundreds of other functions, that started out high end, and become standard generic stuff. tesla cannot possibly compete on any level that means anything

      • Did you even read my post? The fact that VW is a massive car manufacturer is totally irrelevant. They have barely dipped their toes into EVs. Tesla Motors is the top authority on EVs and batteries since they use more batteries than any other manufacturer by far. I repeat, VW knows ICE cars. Tesla knows EVs better than anyone else. Nissan is also a top authority since they’ve been mass producing their Leaf for a while now.

        • Even BOSCH, a major VW supplier, also to most other real makers, has new battery technology, that puts tesla to shame, tesla thinks it can compete with major mfgs, it can’t Bosch, LG, Samsung, Panasonic, and other real battery makers, have already out paced old Tesla products….The dope built a battery factory! so he can lag the industry, at great expense.

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