Electric vehicles (EVs) will play a big role in the future of transportation. Despite continual improvements in internal combustion engines (ICEs), a form of electrification is considered to be crucial by many industry experts if OEMs are to hit future emissions and economy requirements. The question is, how can OEMs and powertrain developers make battery EVs (BEVs) a more lucrative segment?
Bargain batteries
Battery cost continues to be an issue for the BEV segment. However, industry experts have suggested that the price of batteries is coming down by as much as 25% per year. This is due to a number of reasons, the biggest of which is development.
Many companies have been developing innovative batteries in the hope of tackling the cost issue. Most recently, SolidEnergy announced that its new ‘anode-less’ battery provides double the amount of energy density than previous lithium-ion batteries, whilst being up to 80% cheaper.
However, like many other developers, SolidEnergy does not expect to bring the new battery to the market for at least another two years. Yet, as Founder and Chief Executive of SolidEnergy, Qichao Hu, points out, the threat of new and cheap batteries has been “enough to spur other companies into reducing the cost of their batteries.”
Innovation and development aside, scalability is another factor that could potentially help lower battery prices. According to Cosmin Laslau, Mobile Energy Analyst at Lux Research, production in “greater volumes” could help reduce the costs of batteries significantly. He details Tesla’s Gigafactory as a model for this avenue. Laslau believes that it is unlikely OEMs will get to a price with which they are comfortable through this method. Batteries could, however, “get to a place where it’s cheap enough to compete with some lower priced vehicles.”
Cheaper models, bigger bonuses
Following on from the mass production of batteries, Tomoko Blech, a Representative of CHAdeMO Association Europe, a global distributer and developer of DC quick chargers, believes that high volume production of EVs themselves will improve the profitability of the segment. “EV production requires a great deal of capital investment,” he explains. “Cost reduction through high volume production” could therefore offer the most simple solution. “To achieve this, OEMs will need to bring to the market EVs that are attractive to a great many potential EV users,” says Blech.
Laslau recalls that traditionally, EVs have been expensive, and have often resided in luxury segments. However, there is an increasing number of OEMs looking to include cheaper EVs across a range of different segments.
“A great example is the BMW i3, against which Tesla is going to compete directly with its upcoming Model 3,” explains Laslau. “Both will be around the US$35,000 – US$40,000 price point. That’s still not cheap, but it is better than what Tesla has had so far.”
Through offering a greater range of EVs, Laslau believes that OEMs can broaden their market space. Not only will this promote the adoption of EVs to different groups of people, but it could also maximise the profits on offer for OEMs. This approach has been utilised by BMW, as it has developed an entire range of EVs, from affordable to luxury. Manuel Sattig, BMW i Project Manager, explains that “the i3 and i8 are the book-ends. We’re looking at potentials in between, above and below. The mission is very clear: we will go on after i3 and i8. And our idea is to enlarge the BMW i family.”
Hand-in-hand
If the price of batteries is reduced, and OEMs target a broader audience, will the BEV segment become more lucrative? According to Gloria Esposito, Head of Projects at the Low Carbon Vehicle Partnership (LCVP), the two factors go hand in hand. Whilst sales have been much slower than expected, growth will be spurred by both a greater option of BEVs and cheaper batteries.
If Esposito picks one factor that will help OEMs maximise their revenue on the BEV segment it would be through the reduction in battery price. She describes it as the “dominant factor influencing BEV price.” However, by 2020, there will be a “sharp decline in battery price”. This, she believes, will directly equate to a rise in profitability for OEMs which produce BEVs. Furthermore, with positive sales growth forecasted for the foreseeable future, many industry experts believe that the BEV segment holds an enticing profit for OEMs.
For more on this topic, check out the new Automotive World report Can battery EVs ever be profitable?
Michael Nash
