Future Look At EV Batteries

Special to The Auto Channel From: Dr. Brian Morin
President and COO
Dreamweaver International

There are technologies that can take >50% of the cost out of manufacturing batteries. Once implemented, it is almost certain that EV total cost will be lower than ICE.

Indian Wells California March 3, 2016; This week at the NAATBatt Annual Conference, there was a symposium on technologies to reduce costs in lithium ion batteries. I was blown away by the potential, and what it can mean for Tesla and GM . First, I provide a short intro to the technologies. Then, I discuss what it will mean for the Tesla Model 3, the Chevy Bolt, and the future of electric vehicles.

The technologies

24M: 24M is a company that came out of MIT, and has as its CTO one of the founders of lithium ion batteries at Sony . Their innovation is simple: They are using thicker electrode layers, up to 450 microns instead of the normal 60-100 microns. The interesting thing is the reduction in cost: Over 80% cost savings for the current collectors and separator, and over 60% for electrolyte and processing costs, for a total cost savings of about 65%. Think having your $35,000 Bolt go 700 miles on a charge instead of 300.

DexMet: Everyone knows there is too much metal in a battery, and that it is heavy. These guys are expanding the foils to make what is essentially a screen of wire, which they will then coat to form the anode and cathode. With less metal, there will be increased safety (smaller chance of a hard short) and lighter weight. The cost savings comes from being able to do a double-sided coat in one pass, which will cut the coating process time in half. It will also reduce the soaking time with electrolyte.

Buhler: Buhler makes equipment to mix food in an extrusion process. They have applied this to lithium ion batteries to mix the materials, and have proven a process to mix in-line, replacing a 6-7 hour batch mixing process. The time is faster, the uniformity better, with about 60% less energy and 30% of the CAP-EX requirements, plus much lower work-in-process materials.

Oak Ridge National Lab: Oak Ridge, along with others, have developed water-based binders that can eliminate the cost of using expensive organic solvents for coating, and the cost and CAP-EX of the recovery process also. The potential is to take a significant chunk out of the coating costs.

These technologies are four of hundreds that are being worked on by researchers around the world, in companies large and small. There are materials cost reductions, like those of my own company where we think we can cut the cost of the separator by more than 50% over time.

Source: William Oliver (via Wikimedia Commons)

Tesla Model 3 and Chevy Bolt

The Tesla Model 3 and Chevy Bolt have the potential to be game changers, both first order and second order:

First Order: Getting 200-300 miles on a single charge makes these cars all one would need for a daily suburban vehicle, without having to worry about charging during the day. With the silent, smooth ride, low maintenance, gas-station-free life, and low cost of ownership, it is possible that these will make it to the early mainstream stage and achieve high single digit percent sales, reaching hundreds of thousands of vehicle sales per year. Electric vehicle sales reached 500,000 last year globally, and these two vehicles have the chance to double, triple or quadruple that.

Second Order: We have already seen the cost of cells drop from $1,000/kWh to about $225/kWh today, which is faster than any of the pundits predicted five years ago. As the volumes increase, one can be certain that the technologies above, and many more like them, will continue to be implemented to drive the costs down, which will in turn take the $35,000 EV to a $25,000 EV, which will drive more volume, which will lower the costs ... you get the picture.

As an industry insider, I can tell you this is inevitable. There is no stopping it, not with cheap gas or subsidies. The costs are coming down, and they will continue to come down.

Tesla, with their Gigafactory, will control their own destiny. They can choose what to implement and how fast. They are ahead of the battery cost curve today, and they will likely stay ahead. This also is inevitable.

GM, by partnering with an existing battery company and choosing not to build a plant (yet), is a half-step behind. But by launching a 200-mile vehicle, they are only a half-step, and maybe just a quarter. And for sure, they will be second in cost leadership as their volume increases. However, they face the possibility that LG will leverage their cost position to sell to other auto companies, which reduces any competitive advantage GM would have had if they kept the technology and assets to themselves.

People talk about the $100/kWh as a holy grail of lithium battery costs. We will hit that within several years - maybe five, and the costs will keep coming down. I would say it is likely we will hit $50/kWh for automotive and grid cells within a decade. There simply isn't a limit to the innovations that are coming, and the best ideas have yet to be thought of.

What does it mean for you, the investor?

There is a simple bet you can make, and use your judgment and talk with your friends. Costs aside, EVs provide a better drive, but today they are limited in range. The Bolt and Model 3 will make huge strides against that. If the range and costs are fixed, then as an EV owner, I can say there will be very few EV drivers who will ever buy an ICE car again. There is simply no reason, unless you love the smell of gasoline, oil changes, the way the car shakes and gurgles when you turn it on and trips to the repair shop.

The Bet: Bet long on these two stocks. Not for the change next week, or even next year, but for the long haul. Tesla is in the same position Amazon was when they decided to sell more than just books. They have enjoyed 20 years of leadership, 20 years of growth and 20 years of consistent stock appreciation. GM is there with them, but with the disadvantage of an old-school culture (that they are trying bravely to change) and the advantage of a huge manufacturing and delivery infrastructure that will take time for Tesla to build out.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am President of a company that makes components for the lithium ion battery industry, but have no sales to either Tesla or General Motors.