Costs have fallen in six years to around a quarter of 2010 prices
Battery costs for electric vehicles have fallen by more than 70% since 2010, despite significant increases in range on offer from manufacturers. The average cost for a battery pack in 2010 was $1,000 per kWh, compared with $227 per kWh by the end of 2016, a drop of 77%.
This means that the battery pack alone for Nissan Leaf 24 kWh would have cost $24,000 - just under £19,000 by today's exchange rate - when the car was launched. However, developments in technology and scale of manufacturing have brought this down to $5,448 - almost £4,300 - for the manufacturer to produce.
Tesla claims that it is furthest ahead with battery costs, with battery pack prices below the $190/kWh mark, a figure that analysts working on the McKinsey & Company report claim will be the norm by the end of the decade. Tesla CEO Elon Musk has previously stated that the company aims to have a battery cost of $100/kWh in 2020, five to ten years ahead of the competition. Tesla's Gigafactory programme will have much to do with this with greater economies of scale available.
These reductions in price have come at the same time as developments in battery efficiency that have seen ranges increase. The Nissan Leaf, Renault Zoe, Tesla Model S, and BMW i3 have all had newer batteries fitted that increase the range by around 50% in official NEDC figures, and between 20-40% for more accurate 'real-world' driving. The VW Golf will join that list with similar advances in range available later this year.
The reduction in battery costs is seen as a crucial part of the profitability of EVs, making them more attractive to both manufacturers and customers. With falling battery prices will come more models to market and at a cost closer to internal combustion powered cars, offering buyers greater choice. The virtuous circle will only bring down prices further and enhance the options available to car makers and drivers.
The above costs only account for the wholesale price of the battery, and don't cover the rest of the powertrain such as the electric motors, on-board chargers, or wiring. Considering that a 90 kWh battery - as planned for next year's Jaguar I-Pace - would cost more than £16,000 at today's prices for the pack alone, there will be little or no profit for manufacturers building EVs in the short term.
Even Tesla's Model S 60 battery pack will cost around £9,000 to produce, accounting for more than 13% of the car's list price. Fiat's CEO Sergio Marchionne has previously asked drivers not to buy the all-electric 500e sold in California since the company loses money on every one sold.