Economics of Battery-Powered Vehicles

Economics of Battery-Powered Vehicles

The future of Battery-Powered Vehicles (BEVs) depends on the cost of Li-Ion batteries and government subsidies and mandates.

Cost information is difficult to obtain since most reports are by proponents of BEVs and tend to be biased. An example of biased reporting isBloomberg New Energy Finance, which has BEVs economically competitive by 2022.

The following information is based on a report financed by the Institute of Automotive Technology, Munich, Germany, which provides as accurate a picture of key costs as has been available on the internet.

Figure 1 from the Institute of Automotive Technology report.

Percentages used in calculating costs include:

  • ICE Drivetrain 24%, (Engine, transmission, auxiliary units, etc.)
  • BEV Drivetrain, excluding batteries, 8%, (Electric Motor, Inverter, etc.)

General Motors BOLT and a comparably priced Internal Combustion Engine (ICE) vehicle are the basis for comparing costs between BEV and ICE vehicles.

The first step is to isolate the cost of the vehicle without the drivetrain. (See, left chart in Figure 1.)

It’s assumed that this cost is the same for both ICE and BEV vehicles.

To determine the cost of an ICE vehicle, GMs gross profit is subtracted from an assumed MSRP price. GM’s Gross Profit in 2018 was 19.4%, so GM’s estimated total cost of an ICE vehicle was 80.6% times the MSRP price. 

The resulting drivetrain cost is 24% of this cost, or $7,076, as shown in the accompanying table.

The next step, using a spreadsheet, is to determine the drivetrain costs of a BOLT using a Li-Ion battery pack when the battery pack costs are; $200, $100 and $80 per kWh. These drivetrain costs are then compared with the drivetrain cost of an ICE vehicle.

When the battery cost is $200 per kWh, the total drivetrain cost of a BOLT is $14,752, which is more than twice the cost of the ICE drivetrain.

The total drivetrain cost of a BOLT decreases as the cost of the battery pack also decreases.

BEVs will be competitive with ICE vehicles when the cost of the BEV drivetrain is equal to or lower than the cost of the ICE’s drivetrain.

Based on these calculations, the cost of Li-Ion battery packs must be $80 per kWh, or less, before BEVs will be competitive with ICE vehicles.

But this assumes that people will be satisfied with a range of 238 miles which is the BOLT’s range using a 60 kWh battery. ICE vehicles have a range between fuelings of around 400 miles. 

Achieving a range of over 300 miles requires increasing the size of the battery pack. The battery pack costs must be $60 per kWh for the BEV to be range compatible with ICE vehicles. (Based on the spreadsheet used for this article.)

This does not fit the projection made by one of the most ardent supporters of BEVs, i.e., The Union of Concerned Scientists.

From Union of Concerned Scientists website showing cost goal of $125 – $150 per kWh.


Most people believe the current cost of Li-Ion battery packs is around $200 per kWh.

This article establishes that the battery pack cost must be $80 per kWh, or less, for BEVs to begin to be economically competitive with ICE vehicles.

Save this article and use it to track the progress of BEVs becoming economically competitive with ICE vehicles.

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3 Replies to “Economics of Battery-Powered Vehicles”

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