Tesla’s Dream of Battery Domination Has Major Competition

A coming surge in global battery production will drive costs down, a key factor in determining whether electric vehicles will take off.

Tesla’s Gigafactory is planned to churn out 35 gigawatt-hours of cells every year by 2020. That’s a lot of watt-hours, and something Elon Musk is very proud of.

But as Bloomberg points out, Chinese electric car maker BYD plans to produce 34 gigawatt-hours of cells by the same year.  Another Chinese firm, Contemporary Amperex Technology, intends to produce 26 gigawatt-hours by that stage, too.  And there will be other manufacturers joining in, as well as refurbished batteries being reused—meaning that there could be upwards of 130 gigawatt-hours of batteries produced per year by 2020.

All of a sudden, Tesla’s battery output will look like a slice of a much larger pie—a significant slice, but a slice nonetheless.  The volume means that prices should drop big time.  In fact, an analysis by Bloomberg New Energy Finance suggests that prices could fall to $262 per kilowatt-hour by 2020, and as little as $126 per kilowatt-hour by 2030.

That’s perhaps bad news for the bottom line of battery makers. In fact Bloomberg compares it to the fate that solar cell manufacturers have faced, where a flood of the hardware drove down prices by over 60 percent in as little as five years.

But it’s incredibly promising for the electric vehicle market more generally. Last year, a team of academics published research suggesting that when battery pricing hits $150 per kilowatt-hour, we could see “a potential paradigm shift in vehicle technology.”  If BNEF’s numbers are correct, the 2020s could be the decade in which electric cars hit the big time.

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