Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
  • How do you encourage speedier adoption of your product or service?
  • How do you increase the value your product or service creates for your customers?
  • How do you extract more of the value created by your product or service for yourself?

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A copy of the full analysis can be downloaded by clicking on the link at the bottom of this blog entry.

 

This section examines the structure of costs associated with manufacturing Li-ion batteries for use in electric vehicles.

The battery packs used in electric vehicles consist of numerous individual batteries connected together and packaged into modules, which are then connected together and packaged into battery packs.  David L. Anderson, in “An Evaluation of Current and Future Costs for Lithium-ion Batteries for Use in Electrified Vehicle Powertrains” explains this process in a bit more detail:

[F]or automotive applications, individual cells are typically connected together in various configurations and packaged with associated control and safety circuitry to form a battery module. Multiple modules are then combined with additional control circuitry, a thermal management system, and power electronics to create the complete battery pack…

Li-ion batteries have been used for quite some time to power consumer electronics. However, the quality control process is much more onerous for the manufacture of batteries for electric vehicles, due to the flammable nature of the batteries, and the associated need to achieve minimum safety requirements. Anderson indicates that high quality control standards result in low manufacturing yields, on the order of about 60%.

Anderson’s analysis of the cost structure of battery packs indicates that materials account for about 75% of total manufacturing costs. (In the section above, Lithium-ion Batteries: Raw Materials, a different source reported the same cost allocation). More specifically, Anderson reports the top contributors to battery manufacturing costs:

[T]he six most significant drivers of total battery cost are the manufacturing yield, the cathode active material, the lithium salt used in the electrolyte, cell- level R&D, warranty costs, and graphite for the anode.

Figures 6 and 7 are taken from Anderson’s analysis and illustrate his breakdown of manufacturing costs.

Figure 6

Figure 7

Anderson indicates that cost reductions in the manufacture of lithium-ion batteries may be achieved through larger scale production volumes and technological breakthroughs:

Battery cost reductions may arise primarily through two mechanisms: economies of scale associated with increased production volume, and technological breakthroughs. Manufacturing yields will likely improve through the learning-by-doing process associated with economies of scale, though technological breakthroughs in the manufacturing process may also play a role. The cathode active material may be subject to both effects as well: per-unit cost for cathode materials is highly sensitive to quantity purchased … Electrolytes and anode materials could also experience cost reductions from both effects, though economies of scale will likely be the overriding factor for both.

 



 

Return to Part 1: Electric Vehicle Battery Basics

Return to Part 2: The Earliest Electric Vehicles (Hybrids) Used NiMH Batteries

Return to Part 3: Electric Vehicles Now Use Lithium-ion Batteries

Return to Part 4: Current Electric Vehicle Offerings

Go to Part 6: The Future of Electric Vehicles

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