Cost of Batteries Not Dropping

[montyp]

I know I'm probably just being impatient - but has anyone else noticed that the cost of batteries in the last 2-3 years has stopped dropping?

I've only been looking at a narrow range of battery chemistry - Lifepo4, but is doesn't seem like there new chemistry that meets the specs of LiFepo4. It was probably naive to thing the prices would continue to drop. Or is this just a result of the new demand in the auto sector pushing prices - so once auto demand levels out we'll see prices drop again?

 

[wb9k]

You'll see prices drop pretty dramatically once battery makers can run their plants at close to capacity and still sell everything they make. Almost nobody has that going on today. Plants that sit idle half or more of the time tend to kill profitability and drive product prices up.

 

[dogman dan]

Hogwash. They will charge every penny the market will bear. Production costs are only the lowest price they can charge, and have little influence on market price. Like crude oil prices.

Only when they are piling up an alarming stockpile of overproduction, or company failed liquidations happen, will prices drop. The dumping of the A123 pouch cells for example.

Some consumer goods are more cost driven, due to serious competition. Others not. For example, you waiting for cheap Apple I phones?

 

[wb9k]

Gotta respectfully disagree, Mr Dogman. If this company was actually making money at this time, you'd have a point. But it isn't, so you don't. Nobody has ever made money in this business yet except for Tesla who finally managed to show a profit for the first time this year. Prices MUST come down relative to oil for this thing to take off. Real volume has to materialize for that to happen. This chicken-and-egg problem is the reason so many companies in this sphere are tempted to try to grow much too quickly. It's a hallmark of almost every notable fiscal failure in the field.

Cell prices are high right now because we have been forced by new ownership to stop selling them at a loss. As volume mounts (and it is), prices will drift downward--AND we can start making a profit.

 

[arkmundi]

The "marketplace", where people buy & sell things, like batteries, all have fundamentals. The most fundamental is the health of the economy itself, which because of the 2007 crash, has since and is still trying to recover. The cost of batteries not dropping is a reflection of expectations that recovery is/was in full swing. But that's just an assumption. Its all still very iffy. Hope A123 is in it for the long-haul and can survive.

Another fundamental, especially for a company like A123 (Wanxiang) whose future is tied to the motive transportation, is the price of oil. I don't believe, in the age of extreme energy and mega-lawsuits (aka BP), that we'll be seeing the price of oil dropping. That means more demand for electric vehicles, so batteries, of the kind A123 produces. So, assuming that the larger economy can maintain some semblance of recovery, we can expect that prices will NOT be dropping further. If, if, if.....

 

[etriker]

I have never seen them this low before.

http://www.buya123batteries.com/category_s/1515.htm

With the good service I have had with A123m1 cells from 2006 I am thinking these could last as long as Windows 7 ? (2020)

Maybe longer ?

They last so long the price per ride is so low ?

 

[wb9k]

It is a stated goal in this house to cut cell prices in half from where they are today. I'm talking price to customers, not cost to A123, though that has to come down as well for the goal to be achievable.

The OEM's are taking a bath right along with us. They stick with it because they are compelled by law to do so (if they wish to continue selling cars in CA, anyway) and they finally see the writing on the wall wrt to the long-term future of fossil fuels. The investment is painful, but necessary. You can't imagine how funny it is to those of us who work here to have outsiders claim we're greedily raking in the profits. The bottom line is still red across virtually the entire industry.

 

[steeeve]

I realized it's not about price but perceived value. I think prices for lithium batteries are generally falling but battery are still so expensive that we largely avoid taking risks by purchasing an unknown brand. A123, panasonic, toshiba and many others have name recognition and are known for quality. They have less need to drop battery prices to be competitive.

There is no commercially produced battery technology that is vastly better than the other technologies. LiFePO4 has a long lifespan but is pretty heavy. LiPo is high energy, low mass but has a short lifespan. LTO is awesome except for higher internal resistance and lowww energy density. Anyway, my point is that we won't see much lower prices for these chemistries until the manufactures feel pressure from better competition. When a tech becomes obsolete the prices drops.

Another thing to consider is that the initial price of the battery doesn't reflect the long term value. Dont expect the price to fall per kWh if the cycles before 80% double and energy density increases. When I see charts that show prices per kWh dropping in the near future. I dont think they take this into consideration.

 

[dogman dan]

My statement is oversimplified as usual.

But it is true though, that the sometimes cut tabs A123 pouches selling price in the past does not reflect the retail price of the same cells in the future?

As you say, operating at a loss now. They will want that money back before they cut prices. Market pressure may mean they don't get the price they would prefer. But if they can, they will charge more. That's free market 101.

What might drive the prices down, is if enough china factories steal the technology, and overproduce. Personally I'm not holding my breath for high quality cells to get cheap. But I do expect shit quality to get cheap, as exemplified by RC lico.

 

[wb9k]

Good quality WILL get cheaper. It is a top priority in the industry. But quality takes time to achieve and requires significant investment.

 

[John in CR]

Good quality WILL get cheaper. It is a top priority in the industry. But quality takes time to achieve and requires significant investment.

wb9k,

We all appreciate you valuable input, especially about the A123 cells, however, the last statement gags me. Not only has A123 had nearly a decade, but it got a bunch of taxpayer money, so time and money obviously aren't the requirements for high quality and lower prices.

It's my understanding that the Chinese factories have ramped up production to enable their domestic market to get off of lead. Since China is the largest EV market by far, that should help put downward pressure on battery prices.

If A123 wants to be a meaningful part of the battery market they need to crank up production. Having machines idle in an effort to support larcenous prices is simply a continuation of the business mistakes that bankrupted the original company. That tech is all but obsolete due to the relatively low energy density, so the only hope is to use the economies of scale to lower prices. If after this long you guys can't be profitable selling below $200/kwh wholesale, then it's time to make significant changes.

John

 

[jonescg]

The right price is the price the average customer is willing to pay.

We tried to get an EIG order through, but it would wind up being AUD$68 each, or roughly 93c/Wh. Despite us having an effective margin of about 6.5%, this was clearly too much, as no-one is willing to part with that much money despite the quality of the cells. So until the price is remotely close to 70c/Wh, don't expect to make any sales in Australia.

The sluggish economy partly explains why people aren't parting with their money, but the price of quality lithium is also very high considering the value you get. I agree though; give it time. I can't think of much else in the world that has actually gotten more expensive relative to average incomes. Rent is high here, but that's artificial due to our two-speed economy in Western Australia. Other than that, almost everything else has actually gotten cheaper.

 

[RedLine19K]

selling below $200/kwh wholesale, then it's time to make significant changes.
John

Not trying to dig up an old grave but this is a battery costs discussion.
A123 from their own 2008 10K expected to sell for $1000/kwh. During the meltdown their own engineers quoted production costs of 1000+. Today, they want to sell the 65wh amp20s for.....$70 (1077/kwh). see a pattern? Sorry no links but this was all from research I did buying puts in 2011-12.

The only way to become competitive against true $250-400/kwh Li-Ion is to double energy density (instead of 10% in 10 years) which is tough to do starting from the 3.3v vs 3.7v deficit. Or cut costs (tough to do with 20% warranty rates even on cylindricals) even after a decade of R&D yields weren't perfected, and moving to Romulus didn't help. Even if Livonia had maxed 550mwh/yr A123 would still be lagging. A123 main advantages of power density and durability just didn't keep pace now that 200w/kg is common, which means a corresponding reduction in C rates which were already under .5 for BEVS. Stop/start, micro-hybrid were all just kludges to work around $40k battery pack prices. Now that they are under 5K and falling, the market is even less aligned with 2002 tech.

Btw, I feel sorry for the job loss, really don't mind the gov't 125M grant vs buying another F35 and wish A123 had succeeded but I made a lot of money predicting they wouldn't.

LiFePO4ever

 

[friendly1uk]

They won't get cheaper. If they do, they will be taxed back up again. There are two things we will pay through the teeth for, food and fuel. Batteries are part of fueling ourselves. Where would cheap batteries and nuclear plants leave the oil people?
Batteries only need to be a tad cheaper than other fueling methods to see some action. As the pump prices are coming up steadily, why drop cell prices to meet them. Just wait it out a bit as pump prices will go up, taking cell prices up with them. That is the only way to value cells. They need to be cheaper than other options. They don't need to reflect manufacture costs. China has the lithium, and even if they make cheap cells, you won't get them. Taxation will be huge to protect the oil industry. Like it is a person, not a shrinking business we are happy to see less of.

We must have transport, and they must take our money when we buy things we simply must have. Buying cheap cells from china won't happen. We won't be allowed them.

Some serious money is being spent to try and get around the lithium problem. Maybe someone knows the answer, but likes working in research so has not said anything. Or they are still happier selling us stuff out the ground so won't admit it. It won't help though. You will pay pump prices, even if your pumping electric.

Locally, the average commute is 15 miles a day. 300 miles a month. At 35mpg and £1.30 a liter, about £70. The same as it costs to rent a battery for a mid sized renault. They know exactly how much they want us to pay for batteries. The same as we pay at the pump, and that is before charging it. It won't be dropping battery prices that make people move over to batteries, it will be pump prices going up. They won't even have to wait that long at currant rates.

 

[jimw1960]

I think prices for lithium batteries might have to go UP before they can come down. Prices now are artificially cheap due to overcapacity/oversupply, lower-than-expected demand, manufacturers selling at a loss, and government subsidies that favor lithium above all other chemistries. If supply and demand ever get in balance and the government subsidies go away, the price will have to go up.

 

[spinningmagnets]

They will charge every penny the market will bear

I keep reading about a new breakthrough in solar-PV panels, which will allow them to be manufactured for 1/10th the current cost. the articles are always beaming about the bright future where solar-PV is dirt cheap to buy and install on your roof.

I always answer, that if someone actually finds a way to manufacture them for 1/10th of the current cost, they will charge the public only 10% less than the next most popular competitor. Prices will only dramatically drop when there are many competitors feeding a big demand, and they are all swapped over to the new manufacturing process.

Germany structured their system so that it benefitted the customer to install solar-PV that is grid-tied (only needs a small battery at the panel to smooth the flow). In the US, the biggest buyers are off-grid survivalists with a large battery. No demand + no beneficial pricing structure + bad economy = no incentive to innovate...

Same dynamics with E-bike batteries...newbies continue to buy crap to save $100 per pack, so the industry survivors are the low-price crap-producers.

 

[wb9k]

There's clearly a wide range of opinions on this topic, and mine is not in the majority. This is fine, and only time will tell who (if anyone) is really correct. We may all be correct to varying degrees, but I can tell you that A123 absolutely wants to see cell prices come down--way down--because their long term viability absolutely depends on it. They have a plan to make this happen, and it is not to wait for the price of gas to go up some more so they can just leave the actual number where it is today. Same goes for every other player in this market I've ever encountered.

 

[cal3thousand]

They will charge every penny the market will bear

I keep reading about a new breakthrough in solar-PV panels, which will allow them to be manufactured for 1/10th the current cost. the articles are always beaming about the bright future where solar-PV is dirt cheap to buy and install on your roof.

I always answer, that if someone actually finds a way to manufacture them for 1/10th of the current cost, they will charge the public only 10% less than the next most popular competitor. Prices will only dramatically drop when there are many competitors feeding a big demand, and they are all swapped over to the new manufacturing process.

Germany structured their system so that it benefitted the customer to install solar-PV that is grid-tied (only needs a small battery at the panel to smooth the flow). In the US, the biggest buyers are off-grid survivalists with a large battery. No demand + no beneficial pricing structure + bad economy = no incentive to innovate...

Same dynamics with E-bike batteries...newbies continue to buy crap to save $100 per pack, so the industry survivors are the low-price crap-producers.

This^

A corporations main goal is to maximize profits. 2 parts to this. 1) They must operate where the marginal cost of extra production meets the marginal profit of producing that extra. 2) This point is controlled by internal (technological) as well as external (demand) factors.

For the price of batteries to drop, not only does a company need to have the technology to produce efficiently, but they also need competition. Without competition or with a huge technological advantage, a company will operate as monopolistically as possible and charge a high price.

 

[arkmundi]

If I were the CEO of A123 thinking about all this and charting a future, I'd have as a top priority securing a really good, productive long-term contract with a major electric car company. I'd of course have Tesla in my crosshairs, but all the emergent players. I'd let it be known that we're hungry for a high-visibility, high-production contract, a loss-leader. Yea, take a loss, whatever it takes, because its the long play that counts. I'd not give up on Tesla. Elon Musk is a smart guy. There is a cost point he'd buy in to. Once secured, ramp up the factory and produce, produce, produce and drive down the cost of production until your contract is break-even. Play that forward. Its called building the brand name.

 

[wb9k]

If I were the CEO of A123 thinking about all this and charting a future, I'd have as a top priority securing a really good, productive long-term contract with a major electric car company. I'd of course have Tesla in my crosshairs, but all the emergent players. I'd let it be known that we're hungry for a high-visibility, high-production contract, a loss-leader. Yea, take a loss, whatever it takes, because its the long play that counts. I'd not give up on Tesla. Elon Musk is a smart guy. There is a cost point he'd buy in to. Once secured, ramp up the factory and produce, produce, produce and drive down the cost of production until your contract is break-even. Play that forward. Its called building the brand name.

This was A123's strategy the first time around. It didn't work for a number of reasons and will not be repeated by A123. We do have a relationship with Tesla, but it's probably not of the nature you think. The new plan for profitability is far more viable in the real world than the old one. I can't say much more about it than that about it at this time.

 

[Sancho's Horse]

The price needs to come down in both the North American and Chinese markets. In the Chinese market I would bank on increased perception of the destructive pervasiveness of lead battery usage, the long term opportunity cost benefits, increased product life potential, Chinese nationalism, and creating the perception that the small end user who invests in the slightly higher initial cost is both smarter, and higher status than those lead sled creeps. Slow work, but having the cost as low/comparable to lead is critical and speeds the transition most effectively.

The north american market should focus on replacing small "appliances" which utilize lead, and building acceptance of small electric assist vehicles and solidifying perception that lipo is dangerous, and that lifepo4 is considerably safer and more forgiving. This is a bit more fraught. Lawn mowers are an excellent starting point. Build acceptance with that, and then the small grocery getter is an easy choice for making the most of your battery's possibilities. This all takes years.

 

[dogman dan]

Definitely cost of production will come way down. The number may be higher due to monetary fluctuations over time, but they can lower production costs per unit as they scale up production.

What influence that has on retail price will be minimal. Retail price will be determined by other market influences.

Can't think of anything that got more expensive? Man, sure can tell you don't buy American health care. :lol:

Cars and houses etc, those have gone up too, but not really that much relative to income now that prices corrected down in 2008.

 

[Toorbough ULL-Zeveigh]

This is fine, and only time will tell who (if anyone) is really correct.

time has told, you're the noob here.
still waiting for the price of NiMH to come down.
during its entire life run it's held steady betweeen $0.83 & $1 per Wh.
supply, demand be damned; they mean nothing.

why would A123 willingly voluntarily charge less?
the whole point of any corp is to be a profit centre & max profit is the name of the game.

 

[Jolly Jumper]

Before we can ask for dropping prices we should ask what are the prices of the raw materials used in the batteries + the production costs up to the final product including QC.

 

[dogman dan]

Production costs, including R&D, tooling up, financing costs, etc all do determine the lowest price they can charge and stay in business.

But it's all got squat to do with what the highest price they can get away with charging will be. Sooner or later though, if they are charging too much, others will pop up charging less. That's why I keep wishing walmart would start selling 20 ah 12v lifepo4 bricks to go into those kids cars they sell. Be great to get those for about $80 and no shipping.