To some, a recent offer by Tesla Motors to replace batteries in its Model S all-electric sedan for under $150 per kilowatt hour reflects an extremely futuristic view of improving EV technology. To Plug In Cars, though, the offer is more a reflection of the age-old "bird in hand" axiom.

Recently, Tesla outlined the replacement costs for the Model S batteries along with warranty options. Prices range from $8,000 for a 40-kWh battery to $12,000 for an 85-kWh battery. Division The latter cost implies a rate of about $141 per kWh, which is far lower than any automaker or analyst is predicting anytime soon.

General estimates for battery-production costs lie vaguely in the $550-per-kilowatt-hour range, with some far above and below that. Tesla declined requests from AutoblogGreen to elaborate on the cost-per-kWh for the Model S batteries, but the offer to sell batteries at less than a third of that rate – even if delivery is eight years away, as it has to be, PIC notes – is merely an effort to sell more cars today than to provide any sort of clarity on where battery costs will be by the end of the decade. Prospective buyers should look at the offer as more of a marketing expense used to generate immediate revenue than a technology forecast.

It's not like the Model S needs all that much more exposure right now, after winning the Motor Trend Car of the Year Award and other COTY honors.


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  • 61 Comments
      kEiThZ
      • 2 Years Ago
      Teslas is betting on two trends: 1) Not everybody will need a replacement in 8 years. 2) The price per kWh of the batteries will decline at 6.4% per year (compounded) over the next 8 years. If that happens, the $22 000 40 kWh battery pack (@ $550/kWh today) will decline to $8000 ($200 per kWh) in 8 years. At the pace that battery technology is progressing and given the quality of Tesla's battery packs, I'd say those are conservative assumptions.
      Grendal
      • 2 Years Ago
      Rotation is correct. The various commenters covered all this very well when the pack prices were posted in the replacement battery pack article. http://green.autoblog.com/2012/11/30/tesla-adds-replacement-battery-pack-costs-to-price-increase-deta/
      purrpullberra
      • 2 Years Ago
      This is really just a company offering a product that it's first, best customers have been asking (and pleading) for. These people don't care about the 'value' but they do care about peace of mind and they like fixed, up-front costs. It's just another high priced accessory that many Tesla owners will gladly pay for, regardless of it's level of value or return on investment. Also I think it's likely that some people who want to buy a used ModelS in 8+ years will prefer to have a new battery pack. I doubt this is a product Tesla will push on all customers.
      • 2 Years Ago
      It seems that a lot of these calculations are missing a very big element, that is the residual value of the battery that is being replaced. Tesla hasn't said that you get to keep the original battery. Assuming you trade in the pack that came with the car starts to make the calculations a bit closer to reality.
        fly by wireless
        • 2 Years Ago
        A willingly working brain. Careful where you aim it, it's obviously loaded. The battery doesn't just "die" at the end of its life in the car. It still has a large amount of its capacity so it can be resold for renewable energy or other applications.
      • 1 Year Ago
      put my deposit in 8 months ago and still no car or review. But lots of silence Chris
      Dave Schrock
      • 2 Years Ago
      The whole premise seems rather mute to me. How many Tesla Model S owners - especially ones that have the more expensive vehicles - will still want to own that car after 8 years? I'll bet most of them turn it over after only a few years. The resulting lost range of the existing pack from everyday use will just be factored into the cars selling price. Even at the 85 kwh pack of 300 miles, 80% of that is 240 miles - way more than I drive any given day unless I'm on a trip. If the 2nd owner could afford to replace the pack, he or she would probably buy something else anyway. That person -even w/ the lesser range - would still be many $$ ahead as there's so few parts to break down compared to an ICE used car. At any rate, something I've personally thought about...Waiting a couple of years and finding a good used one.
        Ford Future
        • 2 Years Ago
        @Dave Schrock
        This would be for a collector then. Or someone who just likes to keep a car for 10 - 20 years.
        edward.stallings
        • 2 Years Ago
        @Dave Schrock
        Yes, well said. Silly thing about this car is you would need another car if you want to take a trip of any length.
        Marcopolo
        • 2 Years Ago
        @Dave Schrock
        @ Dave Schrock Dave, not wishing to sound like a grammar nazi, but it's 'moot', not 'mute'...........
      Giza Plateau
      • 2 Years Ago
      Does anyone have a sense of how many cars they have delivered?
        Grendal
        • 2 Years Ago
        @Giza Plateau
        Someone has received a car with a VIN above 2500. So they've made over 2500. They are building 80 to 100 a day now. The Canadian cars have been made and they might have unique VINs that aren't included in the normal number sequence. If so, then there are 200 more cars made.
      Armchair Economist
      • 2 Years Ago
      Lithium is one of the most abundant metals on earth and the high cost of these batteries largely relate to processing, which should improve with scale. Tesla is being realistic.
        edward.stallings
        • 2 Years Ago
        @Armchair Economist
        How abundant something is does not always correlate with the cost of something containing it. For instance carbon is abundant (more so than lithium), but carbon fiber is quite expensive. If the element is strongly bound like hydrogen in water, the cost will always be high because the energy to chemically separate it is high. Lithium is never found uncombined nor in high concentrations, so it is never going to be real cheap.
          DaveMart
          • 2 Years Ago
          @edward.stallings
          Lithium is around 18% by weight of lithium carbonate, the form it is used in. It runs at around $50/kg and the Leaf uses 3-4 kgs of it.
      raktmn
      • 2 Years Ago
      Is Tesla holding this money in escrow, or are they treating it like the deposits they take, and use that money to run their business? Tesla could be borrowing money from you to operate their business for at least 8 years, until you need the new battery pack. Let's pull some numbers out of the sky and say that you get your new battery in 10 years. If Tesla borrowed that money from a bank they would owe interest for those 10 years. Even at a conservative 8% loan rate, that would be around $5,500 of interest. These upfront purchases could save Tesla $5,500 in loan interest per 85 kWh pack. Making the real price somewhere around $17,500 for the replacement pack. That is the $12,000 up front, plus the $5,500 that Tesla wouldn't have to pay to borrow from someone else. This second number is just a guestimate, and could be substantially higher or lower depending upon what it actually costs Tesla to get money from other sources. In addition, it is likely that Tesla will keep the old battery for themselves, and will get the value of that old battery. This is typically how it works when warranty replacements happen. Let's just be good and irresponsible and just make up a value of $4500 for a battery pack with 80% of capacity. That also would go towards the cost of the new battery pack. That would put the effective price at around $22,000. That would be around $250 per kWh. This number would get bigger the longer you go without replacing your pack, and the higher Tesla's actual borrowing costs, and the higher the secondary market will pay for used battery packs. It would get smaller the sooner you replace, and the lower Tesla's borrowing costs, and the lower the value of the used pack. Labor to install the pack isn't mentioned one way or another. Free labor would lower that number. Labor charges in excess of actual cost to Tesla would raise that number. There are too many variables to really make any accurate claims about what the price per kWh will be around a decade from now.
        raktmn
        • 2 Years Ago
        @raktmn
        It looks like I was writing my long-winded post, by the time I was done everyone had already covered my points! Feel free to ignore ^^^
          DaveMart
          • 2 Years Ago
          @raktmn
          Ah, but you did it properly! I just used sloppy ball park figures. Anyway you cut it though Musk is taking innocents to the cleaners. I respect what he has done with Tesla, but this is Florida swampland real estate salesmanship.
          raktmn
          • 2 Years Ago
          @raktmn
          I agree with Grendal. I wasn't trying to imply any wrong-doing. I just wanted to point out how wrong it is to just divide the $12,000 price by 85 kWh, and then believe the results are a valid estimate of future battery costs.
          Grendal
          • 2 Years Ago
          @raktmn
          I wasn't directing my comment at you, raktmn. DaveMart and I had a lengthy discussion about this on the original thread. His opinion seems to be that people are being duped, suckered in some way, or are suckers for buying it and I disagree with that. This is a form of insurance and it gives the buyer piece of mind. No one is making Tesla customers buy this.
          Grendal
          • 2 Years Ago
          @raktmn
          We've had this discussion before, but implying that Tesla is doing something wrong here is grossly unfair. Customers have asked for this and that's why Tesla offered it. Just because you don't like it doesn't mean that everyone else has to do what you want. Most consider this an exceptional deal for peace of mind. I'm planning on buying a Tesla and would I buy it? Probably not. But I'm not a big fan of insurance. But I'm also not going to have the arrogance to laugh at someone that wants that feeling of safety.
        SVX pearlie
        • 2 Years Ago
        @raktmn
        There is zero chance this is in escrow. This is cash down, general revenue, with a potential obligation due no sooner than 2020.
      Electron
      • 2 Years Ago
      This offer is not about future battery prices it's more like an insurance that gives you the right to replace your battery pack after 8 years for a fixed price. It's the worst deal ever though due to the small print which apparently entails having to return the used pack to Tesla. If we look at the 85 KW pack: that's likely to have 80%+ residual capacity after eight years being big and thermo managed. So that would be a very valuable 68KWh of capacity you give back to Tesla for a 17KWh capacity improvement at the princely sum of $12K +interest=~$15K. That's ~$900/KWh at a future date where $250/KWh is likely to be the going rate. Again: worst deal ever.
        DaveMart
        • 2 Years Ago
        @Electron
        The principle you are applying is right. It looks like the residual value you are putting on the battery is too high though. A lithium car battery with 20% of its capacity gone is not worth 80% of its new value for two reasons: Hopefully the price of batteries will have declined substantially, so even a new pack should be way cheaper than 80% of its current cost. Secondly it won't really be suitable for car use then, so it is competing with other chemistries for back-up storage and so on which are already a lot cheaper than those used in cars, as they don't have to worry about weight and power as opposed to energy is often of less concern. Whatever the exact figures though this is a bum deal, and you are risking a fair chunk of cash for years for nothing.
          Electron
          • 2 Years Ago
          @DaveMart
          @ Davemart: fair enough, though I feel the theoretical 68 KWh used pack is worth more to a S/40 owner with maybe 70 miles of range left than for grid storage where it would have to compete with cheap low energy density chemistries. It's also good to keep in mind that the less the used pack is worth due to falling battery prices the less the value of the brand new pack will be you took out the insurance for in the first place. No matter which way you cut it this deal will never come your way.
          Electron
          • 2 Years Ago
          @DaveMart
          Not suitable for car use? It can be fitted in a matter of minutes under some 8 year old Model S/40 that badly needs a new battery, upgrading it's original capacity dramatically in the process. I think that's your target market if you were really interested in replacing a battery with still a very substantial 68KWh of capacity left. I agree though that what the S/40 owner would pay for your old pack is completely dependent on what Tesla would charge him for a new pack come 2020.
          Grendal
          • 2 Years Ago
          @DaveMart
          There is discussion on the TMC forum that you can't simply switch out a 40 kWh pack for an 85 kWh pack due to the difference in the battery chemistries and the way they interact with the car. In other words it is more than just physically switching the packs.
          Electron
          • 2 Years Ago
          @DaveMart
          @ Grendal: that would reduce the value of the used pack by the cost of the modifications needed. To not directly loose money on this deal the price Tesla charges for the 85KWh pack 8 years from now needs to be higher than $15k+ the value of the used pack. But even than you end up paying $15K+ the value of the used pack for a 17KWh improvement. Postponing the replacement will net you more extra KWh's, but every year you wait battery prices drop and the amount of interest lost on the initial $12K rises. Bottom line: at the capacity loss rate and battery price development that can reasonably be expected this deal makes no sense. However it might sooth people's battery anxiety. People who really want the Model S but are really worried about battery life and replacement cost can buy some peace of mind.
          DaveMart
          • 2 Years Ago
          @DaveMart
          @Electron: I phrased that poorly. Of course the pack could still be used in a car, I can't imagine Tesla buyers going for it though, and the car companies are setting their sites on using old car batteries for static storage, and that includes Tesla, I am assuming.
      Grendal
      • 2 Years Ago
      Someone recently did a road trip of 753 miles in one day using the Superchargers.
      raktmn
      • 2 Years Ago
      If you are buying a 50K to 100K car, you likely already have multiple other cars.
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