Solutions

9Cost competitiveness of electric powertrains can also be reached at higher battery costs in light-duty vehicles having higher mileage and lower discount rates (both conditions are possible, in particular in the case of fleets), or with higher fossil fuel taxes.

10This is in line with the lower range of values indicated for the utility factor (i.e. the ratio, based on driving statistics, defining the range achieved in charge-depleting condition for PHEVs) in the Worldwide Harmonised Light Vehicle Test Procedure (UNECE, 2018).

11Note that the cost per kWh of PHEV battery packs tend to be higher (about 25%) than for BEVs because PHEV battery packs have lower energy storage capacity and because PHEV batteries require cells which need to comply with higher power requirements than those of BEVs. This has a trade-off with energy storage capacity (per unit weight or volume, battery cells capable to deliver high power store less energy than battery cells delivering lower power). The cost per kWh of PHEV batteries therefore is not directly comparable with the cost per kWh of BEV batteries.

12The TCO for PHEVs is highly dependent on the chosen powertrain. The analysis shown in Figure 5.1 is conservative as it takes into account that PHEVs have a total installed power that is 40% higher than of an equivalent gasoline vehicle. PHEV designs with small powertrains are likely to reach cost parity for higher battery prices even in low fuel price environments.

13ICE vehicles are subject to stronger variations of fuel use per km due to weight increases than BEVs, as discussed in IEA (2019a).

14. Fuel taxation and vehicle taxation are also options to help deliver significant reductions in the price gaps between EVs and ICE or hybrid vehicles. Such options are beyond the scope of this section. The intention here is to focus on technological solutions that can deliver structural changes (either dependent on technology or vehicle design choices) in terms of cost competitiveness for BEVs and PHEVs, independent of the vehicle and fuel taxation regimes. The effects of an increased uptake of electric mobility on fuel, vehicle and other taxation instruments in transport are discussed in the Government revenue from taxation section.

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Battery cost reductions

Analysis of the future development of the three main determinants of battery costs – battery pack size, production capacity of battery manufacturing plants and chemistry – suggests that battery costs declined during the course of 2018 and are expected to continue falling in the near term. (See Chapter 2, Industry roll-out plans and Chapter 3, Implications for automotive batteries).

Results from the BatPac Model with NMC 622 and NMC 811 cathode chemistries and a range of battery pack capacities and plant sizes are shown in Figure 5.2. Using NMC 811 cathodes, average battery sizes around 80 kWh and 30-50 GWh/year factory capacities, BatPac suggests that battery costs in the medium term can fall to between USD 105-120/kWh. This does not include additional medium-term cost reductions that are expected to come from improvements in areas such as anode materials, electrode thickness and cell voltage. In addition, the development of solid state cell technology has the potential to bring a step-change reduction in battery costs. These results are in line with the cost targets of most research and development plans globally, which range 80-120 USD/kWh by 2030 (IEA, 2018a).

Figure 5.2. Lithium-ion and NMC 622 battery cost relative to capacity and factory size

Notes: Costs represent a battery design for a BEV of varying capacities. Cells are modelled considering an NMC 662 cathode and a graphite anode.

Source: IEA analysis based on BatPac 3.17 (ANL, 2019).

There is scope for battery cost reductions through economies of scale and cell chemistry advances.

Significant developments are also being made for post lithium-ion technologies, in particular for solid state batteries. Large investments in solid state battery research are being made in Japan, where an alliance of Japanese manufacturers has joined forces (with public support from Japan’s New Energy and Industrial Technology Development Organization) to develop solid state batteries (Tanaka et al., 2018). Recently, Toyota and Panasonic created a joint venture with the aim of developing solid state batteries in the first-half of the 2020s and intends to do so for various automakers (Toyota, 2019).15

15 This intention is coherent with the indications given in the interim report of Ministry of Economy, Trade and Industry’s Strategic Commission for the new era of automobiles, which makes explicit references to a co-operative approach across industrial stakeholders (Tabeta, 2018).

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If the cost reduction rates are sustained and battery costs continue to decrease, the economic case for BEVs and PHEVs will also be strengthened for vehicles that have an average daily mileage below 300 km. Battery technology is expected to continue to progress in terms of reduced charging times as well as increased capacity to handle high power charging. This, in combination with the use of PHEVs (and fuel cell range extenders – if fuel cell costs are reduced), is well suited to ensure that the attractiveness of electric mobility can expand to a broader range of applications.

Reducing EV costs with simpler and innovative design architectures

The TCO analysis assumes that electric cars have equal costs to ICE cars with the exception of the costs linked strictly to the powertrain and the energy storage system. However, as the experience with the manufacturing of EVs increases and scale increases, there are good reasons to believe that costs for EVs will decline also because of opportunities in other areas.

The possibility to fully redesign the vehicle manufacturing platforms, capitalising on the presence of much fewer moving parts than in ICE vehicles and taking advantage of compact dimensions of electric motors, can offer cost reduction opportunities. A statement by Volkswagen executives announcing the forthcoming launch of the “ID”, the first electric car expected to sell for the price of a comparable Golf diesel (Diess, 2019), suggests that the achievement of price parity between BEVs and an equivalent ICE car can be (at least partly) underpinned by the development of a dedicated vehicle architecture. This suggests that cost reductions are not only limited to powertrain and energy storage system developments. In the specific case of Volkswagen, the statement on cost parity made direct references to the development of a new vehicle manufacturing platform, the Modular Electric Toolkit (MEB) dedicated to the production of over 100 million BEVs and inspired by the ones already in use by the company to manufacture a variety of its models at a large scale (Diess, 2019).16

Adapting battery sizes to travel needs

Since the battery is the major cost driver of EVs, matching the range of vehicles to owners travel habits is critical to avoid costly “oversizing” of batteries in vehicles. A better adaptation of the battery size will also have benefits for material efficiency and reducing life-cycle greenhouse gas (GHG) emissions. Examples of adaptation of battery size that have already been put into practice include:

•Electric bus designs using the opportunity charging concept (i.e. placing chargers at the end of urban bus lines, rather than at the bus depots) are based on the optimisation of the battery capacity of vehicles to fit the required route.

•Car manufacturers offering EV models with different battery sizes to consumers to match their travelling habits.17

Decreasing the need for very high range BEV cars can also be facilitated by the offer of rentals of ICE vehicles to owners of BEVs when planning a long-distance trip. This solution is currently being proposed by several brands.

16To accelerate this process and allow the new platform to establish itself as the standard for electric mobility, Volkswagen also announced its intention to open it to other carmakers (Volvo Trucks, 2019).

17Two examples include the Nissan Leaf and Tesla models, even if this is an option not yet offered in every market.

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