Are battery prices in for a shock?
Battery costs have declined rapidly in recent years, but the market is likely too optimistic about both the timeline for lower battery costs and what happens when we get there.
The focus on average battery costs obscures cost differences among suppliers and overstates the impact of battery-cost declines on EV penetration rates.
The electrification of the automobile will likely be remembered as one of the most important technological shifts of our lifetime. The transition is still in the early stages but is certainly off to a fast start.
Sales of pure battery electric vehicles in 2017 were relatively small, at just below 700,000 units, but this represented a 61% increase from the previous year. To date, rapid growth has been driven by subsidies, favourable regulatory policies and early adopters eager to join the green revolution.
But in order for sales to accelerate into a higher gear, battery electric vehicles (BEVs) will need to close the price gap with their gas-guzzling counterparts, primarily attributable to the high cost of batteries relative to the internal combustion engines, which power the cars of today.
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