Battery cost dropping below $200 per kWh soon, says Tesla's Elon Musk

During its recent fourth quarter 2011 financial results Q&A conference call, CEO Elon Musk had, of course, lots to say about Tesla Motors and its various products. One statement though, concerning the falling cost of batteries, spoke to the broader electric vehicle (EV) market and bears repeating. The high price of energy storage is, after all, one of the major barriers to lower EV prices and, consequently, faster consumer adoption.

We've heard in the past different estimates of battery costs. When the first Chevy Volt battery came off the line it was said to be around $500 or $600 per kWh. For its part, the Nissan Leaf pack was reported to be as low as $375 per kWh. Now, two years down the road what is Tesla saying about the price of its batteries?

A participant from JP Morgan asked (in torturous analyst-speak, using "dimension" as a verb) something to the effect of, "Could you speak about how certain you are of a $200-per-kWh battery price and where you see that number going?" Musk began his response by seeming to deny that figure represented the company's current cost but went on to say, "I do think that cost per kilowatt hour (kWh) at the cell level will decline below that, below $200, in the not-too-distant future."

So, how soon is the "not-too-distant future"? Perhaps 2015. That's the year Tesla is now aiming to begin production of its Gen 3 vehicle – what was historically code named "Blue Star." Tesla had originally planned to make the new Roadster after the Model X, but decided it could make a mass-market vehicle with a price tag in the $30,000 range sooner than it had previously thought.

For what it's worth, Elon isn't the only one talking about a significant downward price trend. Makoto Yoda, president of Mitsubishi's battery supplier, GS Yuasa, says that due to mass production, the price of its lithium batteries will soon be a quarter of what it was in 2009.

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