Making electric vehicles more accessible
【Summary】The high retail price of electric cars is a major barrier to ownership. The cost of making electric vehicles (EVs) is still higher than their suggested retail price, with the most expensive component being the battery. The price of batteries has dropped from $1000 to around $150 per kWh, but it is still not enough to make EVs affordable for most people. The cost of a 60kWh battery pack, overheads, and dealer margin can add up to around $41,500.
When it comes to considering electric car ownership, one of the biggest barriers for many people is the high retail price. It's a well-known fact that electric vehicles (EVs) generally cost more than their combustion counterparts, especially those with a range of around 250 miles or more. This price difference often makes it difficult for people to make the switch to an EV. So the question is, what will it take to make EVs more affordable? And is it even possible?
To understand the cost of buying an EV, it's important to first know how much it costs to make one. Andy Palmer, the former chief operating officer at Nissan who led the launch of the Nissan Leaf, sheds some light on this issue. According to Palmer, at the time of the Leaf's launch, the cost of goods sold was actually higher than the manufacturer's suggested retail price. This means that Nissan wasn't even covering the cost of materials, let alone their overhead expenses.
Nissan's approach to selling the Leaf at a loss was a strategic decision similar to what Toyota did with the original Prius hybrid. However, EVs have a much larger battery compared to hybrids. Palmer explains that the cost of batteries has significantly decreased over the years, from around $1000 per kilowatt-hour (kWh) back then to around $150 per kWh today. Assuming that manufacturers believe a 60kWh battery is necessary, the battery pack alone would cost around $9000. When you factor in overhead expenses and a 15% dealer margin, the total cost rises to around $41,500.
It's important to note that this cost estimate doesn't include any profit for the manufacturer, and it reflects a significant drop from the initial $1000 per kWh. Palmer believes that battery prices will continue to decrease, possibly reaching around $80 per kWh for high-performance batteries. However, this decrease may take a few more years, and the rate of descent is slowing down.
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