Using the Tesla Model S as a battery price metric
It seems pretty clear that batteries for hybrid and electric cars will become cheaper over time. New technologies, better manufacturing, and scale all seem on an inevitable path towards making batteries cheaper. But when? Also, are there any confounding variables lurking?
If Tesla’s Model S battery packs are any indication, then it seems that predicting the future price of hybrids and EVs is largely impossible. At least that’s the conclusion New York Times writer Paul Stenquist reaches after reviewing the pricing of the Model S and its corresponding battery price tell.
It’s not that the pricing of the Model S offers any concrete conclusions; however, it’s Tesla’s own statements that provide the most telling evidence. According to Tesla it is “impossible to accurately forecast the cost of future battery replacements.”
While I’m sure that Tesla probably assumes that prices for replacements will almost certainly be cheaper, are their any confounding variables that could push prices the opposite way? Or force lithium-powered battery prices to remain flat?
The other day I caught a green tech fund manager on CNBC discussing the inability of most related to the auto industry — and other industries for that matter — to secure viable quantities of lithium long term. Even worse, the only companies really trying thus far are from Japan and Korea, a fact cited by other analysts in this space in the past.
Certainly, Japanese and Korean domination of lithium technologies doesn’t mean that lithium battery prices are any less or more predictable, but it does demonstrate that supply issues could be a concern at some point if only Japanese and Korean companies are even trying today, albeit somewhat unsuccessfully.
To be sure, lithium prices aren’t a major cost when it comes to automotive batteries, but if you simply can’t secure enough lithium — at any price — to achieve proper levels of scale, then you might have a problem. In fact, one trader suggested to the green fund manager that perhaps other technologies might surpass lithium before lithium has any real impact on the auto industry.
Unfortunately, he didn’t offer up any suggestions as to what materials or technologies he meant. Perhaps zinc air? Fuel cells? Some radical new kind of energy-storing carbon fiber? Does anyone really know?
Obviously, throughout history many have correctly extrapolated the relative progression of many technologies fairly accurately. Of course, many forecasts and estimates — probably most — have been wrong, even destructively inaccurate.
Perhaps lithium provides an easier bet to make compared to many past technologies, but I’d still rather use someone else’s money to make that bet.