In my last post, I talked about the challenge that low oil prices pose for the electric vehicle industry. The following chart from a 2012 McKinsey battery study shows the key tipping points (click for larger image):
With US gasoline (petrol) prices currently running at $2.5 per gallon, we are falling into the bottom left corner of the chart. In short, the battery price for battery electric vehicles (BEVs in the chart) must plummet to keep EVs in the game. As stated yesterday, Nissan and Tesla are getting their battery costs down to around $300 per kilowatt-hour (kWh), but this is still far above the current sweet spot of $150-$200.
Previously, I also talked about the ‘learning rate’: the rate at which battery prices could fall due to learning from experience manufacturing cost savings for every doubling of battery volume. The industry is in the ‘Catch 22’ position of not being able to crank up volume sufficiently to get down its cost curve since EVs are just too far adrift from internal combustion engine vehicles price-wise to secure volume sales. So what is to be done? Continue reading