CalStart Study On Commercial Vehicle Battery Cost Assessment

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YUNEV, CalStart, and the California Air Resources Board (CARB) Hybrid and Zero-emission Truck and Bus Voucher Project (HVIP) teamed up to conduct a cost assessment on commercial vehicle batteries. The focus of the study was on the strategic sourcing challenges for North American truck and bus original equipment manufacturers (OEMs) and Tier 1 suppliers.

The study aims to give OEMs and Tier 1 suppliers in the US commercial vehicle industry estimates of battery costs while providing an overview of important conditions regarding today’s state of e-mobility battery sourcing and supply. The target audience for this study is commercial vehicle OEMs that produce medium-duty and heavy-duty trucks, buses, and other commercial vehicles.

The 73-page report is an in-depth read that you can explore here.

What The EV Battery Report Includes

The report is divided into sections or key points below.

• The Two Different EV Worlds
• Competing Technologies, Policy Drivers & Market Factors
• Key Cost Factors
• Battery Industry Structure
• Battery Cell, Module, and Pack Costs
• Warranty, Financing, and Recycling Considerations
• Commercial Vehicle E-Mobility Deployment Status
• Forward-Looking Forecasts
• Policy and Strategy Implications

I will quickly summarize these sections here.

The Two Different EV Worlds

It’s important to remember that we are looking at two very different EV worlds — light-duty passenger electric vehicles and commercial electric vehicles.

There are several passenger car OEMs such as Tesla that are producing EVs at the rate of hundreds of thousands per year. There’s an even larger group of OEMs producing EVs at the rate of tens of thousands per year. However, in contrast, commercial vehicle OEMs and their Tier 2 suppliers in North America are only producing and delivering EVs and EV systems in the dozens (per year). In some cases, at the rate of hundreds annually.

In California last year, there were over 145,000 passenger plugin vehicles sold and delivered. In the same state, there were fewer than 100 medium-duty and heavy-duty battery-electric trucks sold and delivered.

Competing Technologies, Policy Drivers, & Market Factors

In this section of the paper, the writers emphasize how competing technologies, policy drivers, and market factors make an impact. Although truck and bus electrification efforts have a lot of investment and attention in the US and around the globe, they also have competition from established technologies.

Even though there are new zero-emission regulations such as the Advanced Clean Truck Act (ACT), the majority of both medium- and heavy-duty truck and bus purchases in the US for the next decade will still be non-EVs.

There are promising new policies and funding sources such as the US Department of Energy’s Loan Programs Offices that have provided over $40 billion in loans to help deploy energy infrastructure projects in the US. However, it’s not clear how these new sources will impact domestic battery supply or whether the new capacity would be quickly consumed by passenger car, SUV, and light-truck demand.

Market factors are challenged by news announcements that prevent the ability to maintain a balanced view of real market conditions. In addition, the news and excitement of new OEMs such as Tesla and Rivian, which are slated to bring in previously unimagined levels of EV product offerings, have quite a lot of enthusiasm. However, the question is when will these new products become cost-effective? Another question is how will the transition from initial prototypes to pilot projects to production release and volume ramp-up play out?

Key Cost Factors

In this section, the study simply highlights the key cost inputs that drive battery costs for medium-duty and heavy-duty EVs. The predominant cost factor in the production of individual battery cells is raw materials, which account for around 70% of the total cost of today’s average battery cell. The majority of that cost is driven by the cathode and anode materials.

Another factor that impacts the battery cost is the battery cell chemistry. Lithium titanate (also known as lithium titanium oxide or LTO) has an advantage in terms of its ability to accept high charge rates while delivering long cycle life. Lithium nickel manganese cobalt oxide (NMC/NCM) or lithium-ion phosphate (LFP)s don’t have the same advantages as LTO.

Other factors include new advances in battery technology and next-generation lithium battery designs as well as the impacts of actual, forecasted, and promised production volumes. Other cost factors mentioned are non-recurring engineering costs, which include the upfront engineering cost needed to design, validate, and release a new pack design into production.

Battery Industry Structure

The report noted that the lithium-ion battery cell itself is the key building block for all EV mobility applications. It also shared a bit of the history of the industry for context. For example, cell manufacturers have been increasingly investing in building megafactories and gigafactories to improve the quality while reducing the cost of battery cells over the past decade.

China is the dominant source of battery megafactories today. However, most of 2019’s capacity in the US was and still is fully captured by Tesla and Panasonic. Despite Tesla’s progress, the US has been lagging in terms of domestic battery production capacity, especially in the commercial OEM and Tier 1 market. The report showed a forecast for the lithium-ion battery megafactory footprint for 2024. This indicates that China will continue to make massive investments in lithium-ion battery capacity throughout the next 5 years. Europe is also predicted to make significant investments. But it’s up in the air for the USA. The earlier-mentioned US DOE loan and federal policies could help, but those plans haven’t been finalized and were not included in the study’s forecast.

Battery Cell, Module, & Pack Costs

Currently, battery cell, module, and pack prices in the commercial vehicle market widely vary between OEMs and vehicle applications. Due to this, the report emphasized that any specific cost and price information should be assumed to be precisely wrong.

The cost and price information the report shared is provided with the goal of conveying roughly the right directional cost and price metrics. That being said, YUNEV, the report noted, is confident that its insights and perspectives shared in the report will be valuable, especially for informing policy and strategic sourcing decisions. One key piece of information the report discusses in this section is Bloomberg New Energy Finance’s battery cost reduction graphic that shows that battery production investments and ongoing battery technology improvements have reduced the cost of battery packs by 85% over the past decade.

Another topic in this section brought is the disparity in the battery cost data among major EV passenger car OEMs and how this would explain the difficulty in creating cost estimates (and cost-per-EV-range estimates) for OEMs in the commercial vehicle market. The latter market’s range of EV battery sourcing and scale is much more pronounced.

“During the past few years, it has not been uncommon for commercial vehicle OEMs and their Tier 1 suppliers to pay two to three times, or even higher, the cost per kWh than their passenger car OEM counterparts….”

This section also covers the structural differences between the commercial vehicle market compared with the passenger car market. Perhaps another article about this particular section is needed.

Warranty, Financing, & Recycling Considerations

The report emphasized how critical battery warranties and extended warranty options are for commercializing EVs in the commercial vehicle space. The reason is that fleet managers will most likely look for contractual warranty commitments from EV manufacturers and their battery suppliers. This is mostly due to the increased scrutiny to provide accurate TCO (total cost of ownership) analysis.

“For commercial vehicle OEMs and third-party systems integrators, the lack of motivation and/or economic incentive for the cell supplier to offer robust warranty coverage presents a real challenge. Can the OEM or systems integrator afford to provide an extended battery pack warranty to the fleet customer without passthrough warranty protection from the cell supplier(s)?”

Commercial Vehicle E-Mobility Deployment Status

The report noted previously that the announcements of companies such as Amazon ordering 100,000 electric delivery vans from Rivian can create an impression that the commercialization of EV commercial vehicles has already happened. However, by the second half of 2021, Rivian and Arrival hadn’t yet produced their first production vehicles for the commercial vehicle segment. Although these companies are making progress towards their goals, the report pointed out that they along with their future business forecasts should be seen in the context of an accurate and up-to-date current state across the commercial vehicle industry.

In this section, the report shows a current view of the actual number of units deployed and the latest SOP dates for some of the highly publicized electric commercial vehicle launches.

Forward-Looking Forecasts

The report noted that for new markets and technologies like e-mobility for commercial vehicles, almost all of the forecasts are always wrong. However, they do provide value — the thought processes and reasoning behind these forecasts are where that value lies. In this section, the report listed a few of these predictions.

Policy and Strategy Implications

In this section, the report noted that YUNEV observed commercial vehicle fleet managers and transit agency leaders over the past 5 years have moved away from if or why EVs should be bought. The conversations are centered around questions such as “How much will I need to pay for EVs?” or “Who has the right EV product for my fleet application?” or “Where and how can I buy it?” and “How do I re-charge the EVs?”

For over three decades, there have been moves toward introducing advanced powertrain technologies to commercial fleet customers, and the report noted that the current dialogue holds promise for the deployment of more electrified trucks and buses.

You can read the full report here.