Electric cars are already a reality, but they are an expensive reality. The idea of driving an EV for a long distance is daunting not because it cannot be done, but because it would be an expensive trip. Tesla, however, is trying to change this by developing a low-cost battery that is economical in the financial sense as well.
As Electrek has reported, the average electric vehicle battery cost has already dropped by about 80 percent in the last six years. Despite this reduction, however, the rates still average about US$227/kWh. So while the change is notable and definitely helps the industry, the price is still what an average individual can readily accept and support.
In order to actually appeal to a mass consumer audience, EV companies will need to significantly reduce battery costs, both in terms of the cell itself and the pack cost. This is exactly what Tesla is trying to do with the Gigafactory. The company had previously suggested a 30 percent further decrease, but has now changed its tune and is boasting a 35 percent cost reduction.
The actual cost that Tesla has its eyes on have not actually been revealed. But early last year, the company did claim that it would be below US$190/kWh. That, however, was before actual production began in the Gigafactory. Now promotional videos are suggesting the earlier mentioned 35 percent reduction instead.
As Smart Stock News has reported, the Gigafactory is still under production and is therefore not at full capacity as of this writing. Nevertheless, battery production has already begun. The publication went on to note that one of the main reasons the Gigafactory was designed and built is to reduce the overall cost of batteries, which would, therefore, make electric cars more affordable to all and any individual that is interested. The numbers discussed below indicate that Tesla is on the right path to making this a reality.
What is interesting about this is that the numbers arguably have more basis now. Before the Gigafactory was in place, Tesla CEO Elon Musk announced an estimated cost reduction, but now that Tesla and Panasonic have actually started production on the new 2170 battery, the company would have more basis for its claims. Which is likely why the EV company can put such a low price on the upcoming Model 3.
The publication then went on to discuss how the cost might only be US$124/kWh at the end of the day. That is roughly a 35 percent reduction from the initially claimed US$190/kWh. If the battery fitted into the Model 3 will be a 55kWh battery pack, the battery of the base model of the Model 3 would cost less than US$7000.
The battery of the Model 3 is estimated to make up a large chunk of the overall US$35,000 cost of the vehicle, but with the computation above, it is starting to make sense how Tesla can afford a vehicle of that pricing. Not just for the industry, but for the company itself. Other vehicle manufacturers have produced low-cost electric vehicles, such as the Chevy Bolt.