Battery Costs and Elecric Vehicles/New PRTM Findings

Dear AutoChannel-We thought you might be interested in data from global management consulting firm PRTM, a worldwide leader in e-Mobility, about electric vehicles and battery technology and costs.  According to PRTM, a 50 percent battery cost reduction by 2020 is not only feasible, but likely, and without the need for major technological breakthroughs that other emerging technologies in the past have relied upon to gain wide scale adoption. It's an interesting perspective particularly in light of recent studies by BCG and NRC.  As background, PRTM was selected by the recently formed Electrification Coalition to develop the Electrification Roadmap, a sweeping report aimed at fueling mass adoption of electric vehicles to reduce our country's dependence on oil.

Statement from Oliver Hazimeh, Director and Head of the Global E-Mobility Practice, PRTM (www.prtm.com)


*         Total lithium ion battery cost reductions exceeding 50% by 2020 are likely.

*         Battery cost reductions coupled with factors such as government environmental policies and rising oil costs could drive plug-in vehicle adoption of up to 10% of new vehicles sold by 2020.



Lithium ion battery cost reduction has been broadly discussed as the key enabler for electric vehicles (EVs) to become viable as mass market vehicles in the coming years.  It is widely expected that battery costs will need to come down by more than 50% before the total cost of ownership of EV's will approach that of an internal combustion engine.



While such cost reductions are significant, they are not dependent upon the technological breakthroughs that other emerging technologies in the past have relied upon to gain wide scale adoption.  Rather, according to a recent PRTM analysis, the majority of these battery cost reductions can be achieved simply through optimizing operations across areas including production/manufacturing, supply chain design and product development.



*         Production/Manufacturing Process Optimization: As battery production volumes increase, process optimization will drive improvements in production yield rates.  Coupled with scale efficiencies that producers will achieve as they supply packs in volumes exceeding 500,000 units per year, we expect that production process optimization alone will yield a 20-25% reduction in battery costs by 2020.



*         Supply Chain Design: Another example of operational enhancements expected to yield significant improvement in battery costs is in the extended supply chain.  Cell manufacturers, for example, will likely see 10-15% cost reductions through pooling material spends and optimizing the design of their supply chains in phases as volumes increase.



*         Product Complexity: The supply chain optimization benefits will be further increased through design platform optimization to reduce product complexity.  For example, in this early ramp-up phase, a number of different cell and pack design platforms will emerge due to unique OEM and vehicle requirements.  However, as de facto standards emerge, battery producers will optimize their design platforms, which will drive additional production and supply chain benefits with the potential of additional cost reductions of up to 10%.



In addition to significant cost reductions from operational improvements, PRTM also expects additional reductions from ongoing material advancements, as well as local government manufacturing incentives.



According to PRTM, total lithium ion battery cost reductions could well exceed 50% by 2020.  These cost reductions, when coupled with factors such as government environmental policies and rising oil costs, could drive plug-in vehicle adoption of up to 10% of new vehicles sold by 2020.



PRTM is a global management consulting firm.  More information can be found at www.prtm.com