Review of Environment, Energy and Economics - Re3 Light Duty Vehicle Battery Costs


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Light Duty Vehicle Battery Costs
Thomas Longden
Energy - Articles

Comparing the costs of batteries can be confusing and/or problematic. This article aims to clarify some of the issues that have led to confusion when discussing both the present and the future cost of batteries. The specification of a ‘break-through price’ of batteries in terms of dollars per kilowatt-hour (kWh) will need to allow for a variety of factors. This includes the type of vehicle that is envisioned to compete with traditional combustion passenger vehicles and the battery capacity of the battery pack that matches the dollar per kilowatt-hour price. As the IEA has provided an average approximation of the ‘Internal Combustion Engine Parity Target’ for both PHEV and EDV batteries, it is difficult to compare this target to the estimates discussed within this article and within Longden (2014).

Keywords: Batteries, Light Duty Vehicles

JEL classification: O39, D24

Suggested citation: Longden, Thomas, Light Duty Vehicle Battery Costs (July 10, 2014). Review of Environment, Energy and Economics (Re3),

Comparing the costs of batteries is not a straight-forward exercise. Discussions surrounding a ‘break-through price’ of batteries, that will mean that battery integrated vehicles are competitive with traditional combustion passenger vehicles, are complicated by a range of issues. There is the issue of differences in the method of calculation, battery chemistry, technology profile and the amount of production, which implies different costs due to learning by doing. There is also the distinction of whether the battery is for a plug-in hybrid electric drive vehicle (PHEV) or an electric drive vehicle (EDV). The rate and depth of discharge of the batteries are central to differences in dollars per kilowatt-hour (kWh) estimates between PHEVs and EDVs.

Confusion about the current price and a break-through price
Brad Berman has noted that “confusion about current prices—or future costs to make EVs competitive—are exacerbated by comments from auto executives who claim they have already greatly reduced battery costs”. (Berman, 2012) In the same article, Berman notes that low numbers from automotive companies and higher numbers by analysts will continue as the true cost is a tightly guarded secret. And while this article will review a range of estimates, it is by no means exhaustive and solely developed with a discussion of the difficulty of comparing battery costs and break-through prices in mind.

A notable example of a specification of a break-through price of batteries can be seen in a report by the IEA titled ‘Global EV Outlook: Understanding the Electric Vehicle Landscape to 2020’. IEA (2013) focuses, in part, on the Electric Vehicles Initiative (EVI) and data collected from EVI member governments on a range of issues. Upon discussing EVI targets, IEA (2013) provides an ‘Internal Combustion Engine Parity Target’ of $300/kWh in 2020. However, as this is an average approximation for PHEVs and EDVs it is difficult to compare this target to the estimates discussed within this article and within Longden (2014).

A study conducted by McKinsey in 2012 notes that their “analyses indicates that the price of a complete automotive lithium-ion battery pack could fall from $500 to $600 per kilowatt-hour today to about $200 per kilowatt hour by 2020 and about $160 per kilowatt-hour by 2025”. (McKinsey, 2012) And while clarification is made on the depth of discharge (70%) and the profile of the battery pack, the specific amount of kWh’s for this estimate is not provided. In this case it is difficult to assess whether or not the estimates of the study are consistent with those produced by the author in Longden (2014). While the estimates for 2011 and 2020 seem consistent, without the specific battery capacity (i.e. the kilowatt-hours) it is difficult to confirm this.

Figure 1 - Estimates of 2011 battery costs in terms of battery capacity, $/kWh and aggregate cost

Note: the battery pack costs ($/kWh) for 2011 have been sourced or imputed using the baseline estimations from Element Energy (2012). The 16kWh (PHEV) and 85kWh (EDV) batteries are those used as reference cases within Longden (2014) and Bosetti & Longden (2013). Diamonds reflect numbers sourced from Element Energy (2012) and squares are the points that have been imputed in Longden (2014). Longden (2014) utilises the following functional form for the imputations: $kWh(i)=kWh(l)*((kWh(i))⁄($kWh(l)))^(-α) with kWh(l) denoting the lowest kWh level given by Element Energy (2012) and kWh(i) denoting each subsequent kWh level, i.

Battery cost estimates for different battery capacities

Rather than discussing the full range of issues that may result in different battery cost estimates, this article aims to point out that in cases where battery capacity is not provided, the sensitivity of battery cost in terms of $/kWh to the level of battery capacity should give rise to caution. eThe sensitivity of $/kWh estimates to the level of battery capacity is reflected in the range of battery costs for 2011 that are presented in Figure 1. 

Figure 1 reviews a range of battery cost estimates for the present day period. The present day period is taken as the estimate for 2011 as this is the estimate consistent with Element Energy (2012), Bosetti & Longden (2013) and Longden (2014). Within Figure 1, diamonds denote the estimations sourced from Element Energy (2012), while the squares denote the estimates imputed in Longden (2014) using a simple functional form (refer to the note under Figure 1). The larger squares within Figure 1 denote the values used within the WITCH model for 2010 and are associated with the PHEV and EDV vehicle types modelled in Bosetti & Longden (2013) and Longden (2014).

The curves shown in Figure 1 show that discussing, or eliciting estimates, for EDVs and PHEVs separately is important as distinct properties result in two curves that do not overlap. The different cell design and higher thermal management demand results in a higher cost per kilowatt-hour for PHEV packs. PHEV battery packs have a high power to energy ratio and as result the battery cells must discharge at higher rates. This makes the power requirement of PHEVs more difficult to meet at a low state of charge and impacts the feasible depth of discharge. (Element Energy, 2012) Note that the battery capacity within the Element Energy (2012), Bosetti & Longden (2013) and Longden (2014) estimates represent the total energy capacity of the battery.

In comparison to all of the costs discussed above, it should be noted that Tesla’s CEO Elon Musk has noted that, "I do think that cost per kilowatt at the cell level will decline below that, below $200, in the not-too-distant future." (Berman, 2012) Indeed, the $200/kWh number has been widely discussed, as has this quote and the current cost of Tesla batteries. 

On the issue of the cost of Tesla batteries, DeMorro (2012) calculates a similar cost to those that Longden (2014) derives based on the Element Energy (2012) estimates for $/kWh - refer to the note under Figure 1 for how the Longden (2014) estimate was derived based on Element Energy (2012). DeMorro (2012) notes that “Tesla has been quoted as saying the Energy Storage System, or ESS, on the $109,000 Roadster costs around $36,000 to replace. At 53 kWh, that puts the battery cost per kWh at $679.” (DeMorro, 2012) The estimate for a 50 kWh EDV battery consistent with Bosetti & Longden (2013) and Longden (2014) is $645.

The announcement of a replacement 85 kWh battery pack by Tesla has added to the debate over the current cost of Tesla batteries and some have made calculations based on this figure. However, using this announcement as a basis for $/kWh estimates is problematic. Amongst the issues that Berman (2012) points out is that the conditions of the replacement battery pack offer means that eligibility for the offer would only occur in 2020. Amongst the conditions of the offer are the following: - the replacement battery needs to be purchased within 90 days of taking ownership of the vehicle, and - the offer will only be honoured after the end of the eighth year of ownership. Berman (2012) notes that the risk of what a battery will cost in 2020 is an issue for others to discuss, but that in his opinion the offer reflects marketing considerations rather than reflecting changes in battery cost. Indeed, Berman (2012) states that this is “how we should look at the $12,000 battery replacement offer—a nice way to overcome customer doubts about battery longevity, not as any indication of what batteries really cost.” (Berman, 2012)

The presentation of the PHEV and EDV battery cost curves in Figure 1 has been inspired by an attempt to create awareness that statements on the cost of a battery will be highly dependent upon a range of factors. These factors include the type of battery integrated vehicle discussed and the battery capacity of the pack. Without these details, discussing and comparing dollars per kilowatt-hour estimates can be misleading or at the very least be the cause of confusion. Estimates of the break-through price of batteries will also need to account for these factors and this is highlighted by the difficulty in comparing the IEA target to the estimates discussed within this article and within Longden (2014).


Berman, B. (2012) ‘Real Electric Car Battery Costs Remain Elusive’. 

Bosetti, V. and Longden, T. (2013) Light Duty Vehicle Transportation and Global Climate Policy: the Importance of Electric Drive Vehicles, Energy Policy, Vol. 58, July: 209-219. 

DeMorro, C. (2012) ‘$200 Per kWh Batteries By 2015? Maybe, Says Tesla CEO’. 

McKinsey (2012) ‘Battery technology charges ahead’, McKinsey Quarterly. 

Longden, T. (2014) ‘Travel intensity and climate policy: The influence of different mobility futures on the diffusion of battery integrated vehicles’, Energy Policy, Vol. 72, September: 219–234.









Thomas Longden, Associate researcher, Fondazione Eni Enrico Mattei