Tesla holds a large lead over rivals on the subject of paying much less for lithium-battery cells and having the bottom value EV battery packs, in line with a brand new report from Cairn Power Analysis Advisors.

What’s extra, Tesla is predicted to proceed having the bottom prices within the EV business by the top of this decade, with General Motors closing the hole, Cairn ERA mentioned.

“Tesla is unquestionably placing the hammer down on the accelerator pedal.  They see this because the essential interval and so they’re constructing out their capacities,” mentioned Sam Jaffe, managing director of Cairn ERA.  ”Have a look at what they’re doing in Shanghai and in Berlin and now in Austin, Texas.  They’re simply piling manufacturing unit upon manufacturing unit.”

Jaffe, who tracks the battery and EV business, says Tesla’s benefit stems not solely from the size of its operations, but additionally from Elon Musk’s relentless pursuit of decrease battery prices.  Battery packs are the largest expense in manufacturing electrical automobiles and are the first motive the common transaction worth for electrical automobiles offered in February was $53,392 versus $40,472 for all new automobiles, in accordance auto web site Edmunds. 

In accordance with Cairn ERA, Tesla pays a median of $142 per kilowatt hour (kWh) for battery cells bought from its three suppliers: Panasonic, LG Chem and CATL. By comparability, GM pays a median of  $169 per kWh for its battery cells whereas the business common runs at about $186 per kWh.  Paying far lower than different automakers for lithium-ion battery cells permits Tesla to additionally lead the business in the associated fee to fabricate EV battery packs. Cairns knowledge estimates that Tesla’s battery packs value, on common, $187 per kWh whereas GM’s packs value $207 per kWh and the auto business spends a median of $246 per kWh for battery packs.

Jaffe says Tesla’s battery packs are 10% inexpensive than GM’s and 24% lower than the remainder of the auto business as a result of Elon Musk and his group have aggressively pushed to chop prices over the past decade.  ”Every little thing is targeted on value. The decrease the associated fee, the extra reasonably priced the automobiles turn into,” he mentioned.

Tesla did not return a request for touch upon Cairn ERA’s value calculations.  At Tesla’s Battery Day final September, Musk confirmed developments in cell design he mentioned may decrease  battery prices by 54%.  Throughout the occasion Musk mentioned, “One of many issues that troubles me essentially the most is that we do not but have a very reasonably priced automotive.”

Whereas Cairn ERA’s analysis predicts Tesla will stay the associated fee chief in battery cells and EV battery packs by 2030, it additionally predicts GM will scale back that hole and get shut to cost parity with Tesla by the top of the last decade. Jaffe says GM’s skill to catch Tesla is a mirrored image of the automakers choice to go all-in on electrical automobiles.  

“GM is absolutely dedicated and is taking this whole integrative method which goes to permit it to be very near Tesla, though the size nonetheless is not in the identical ballpark as what Tesla is planning,” mentioned Jaffe. 

GM plans to speculate $22 billion by 2025 growing its EV program, which incorporates rolling out the all-electric Cadillac Lyriq later this 12 months.  Subsequent 12 months, a battery plant operated by GM and LG Chem will open exterior Lordstown, Ohio. As that facility ramps up manufacturing of Ultium battery packs, GM is predicted to steadily decrease its EV prices. When requested in regards to the Cairn ERA value projections, GM spokesperson Jim Cain mentioned, “We intend to be the business benchmark and we stay up for studying the report.”

The large problem for a lot of automakers shall be catching as much as Tesla and GM on EV prices. Jaffe says some automakers like Volkswagen are making the investments wanted to shut the hole, however many others haven’t.  

As EV gross sales rise over the subsequent decade, Jaffe believes some automakers is not going to have the dimensions or value efficiencies to actually compete. Particularly, Jaffe questions whether or not Japanese automakers have been too gradual to completely embrace going electrical.

“They have been digging a gap for themselves by being so reluctant,” he mentioned. “Being dragged kicking and screaming in the direction of this finish recreation of electrical automobiles has actually harm them. “

 CNBC’s Meghan Reeder contributed to this report