How Much Do EV Batteries Cost?

Introduction

Electric vehicles are smooth, quiet, fast, and fun to drive. They don't emit poisonous gases or even gases like carbon dioxide that some connect to climate change. So after more than a decade of availability in the U.S. market, why aren't they well on their way to becoming the dominant vehicle type in the United States and around the world? With all the advantages they offer — clear obvious advantages over gasoline-fueled internal-combustion-engine (ICE) cars — why haven't they taken the lion's share of all vehicle purchases? The key reason is cost. Currently, the typical battery-electric vehicle costs at least 10 percent more than an equivalent internal-combustion-engine car. And in an economic era of high inflation, low growth, and uncertain prospects for the future, paying 10 percent or more for something as expensive as an automobile just isn't in the cards for many of us.

Why Are EVs So Much More Expensive?

When you compare an electric vehicle to an ICE car, the electric vehicle appears to be much simpler to engineer and build. While an internal combustion engine requires a fuel delivery system, a cooling system, a starting system, and a complicated transmission to get power to the wheels, an electric car doesn't require any of that. Instead, its simple-to-engineer-and-manufacture electric motor (or motors) gets electricity from a battery pack, and the motor propels the vehicle through a very rudimentary transmission. Of course, the opportunities offered by electric power can tempt EV engineers to add features to achieve worthwhile ends like better drivability, more traction, and longer battery life. But the basics are simple. That's why if you built a car from a kit as a child it was probably an electric car, not a gas-powered car. While simple is better and typically cheaper, the problem with an electric car is power storage. Because of the nature of electricity, storing enough of it to operate an automobile at typical speeds for a reasonable number of miles takes a lot of storage. That means big, heavy batteries, and batteries are expensive.

How Expensive are Typical Vehicle Batteries?

When you consider the design of an ICE vehicle, it is easy to grasp that building a tank to hold 15-20 gallons of gasoline isn't very costly. In the typical car, that much gas should offer something like 300 - 400 miles of operating range. And that operating range can be recovered in a few minutes' time by simply refilling the tank with gas. In contrast, a battery that can provide an electric vehicle with similar range is extremely expensive. In these inflationary times that are also rife with parts shortages and supply chain issues, it is hard to peg a general price for an EV battery. That said, current estimates are that they cost the car makers about $130 per kilowatt hour. So depending upon the capacity of the battery, it could have a "raw" cost of anywhere between $5,000 and well more than $20,000. Note too, that this is the manufacturer's cost. If you need to purchase a replacement battery, you can expect to pay a markup for packaging and delivery. And you will also have to pay a significant amount for the labor to remove the old battery pack and install the new one.

Will Replacement Battery Prices Decline?

There is a general expectation in the auto industry that battery prices will decline —perhaps radically — over time. And certainly, the price-per-kilowatt-hour has been declining over the past decade as EVs have grown more popular. But as they say in investing, past performance is no guarantee of future results. Technical advances and economies of scale could and probably will bring the average price of batteries down over time. But there are headwinds that might slow the decline in battery prices. One, of course, is inflation, which is currently running like wildfire through the world's economies. And the second is the fact that EV batteries rely on raw materials that include rare earths that are, by their very name, rare. Some predict that shortages of elements like cobalt will become a serious problem affecting the supply and thus the price EV batteries going forward. Of course, if supplies are low, prices will be high.

Manufacturer Warranties on Batteries

It should be noted that virtually all EVs currently on the market have batteries with very long predicted lifespans — typically 8-10 years or longer. Most offer very lengthy battery warranties that can stretch to 100,000 miles or more. For instance, the 2022 Tesla Model 3, the industry's most popular EV, has a battery and electric drive unit warranty of eight years or 100,000 miles, whichever comes first, with minimum 70 percent retention of battery capacity over the warranty period. The battery warranty on a 2023 Nissan LEAF EV is very similar — eight years or 120,000 miles. These warranties are longer than the typical ICE powertrain warranty. But one gray area is the retention of battery capacity. Some manufacturers address this; others take the position that if the battery is providing electricity it is working despite diminished capacity resulting in diminished range. You might want to replace your battery because it has degraded but the manufacturer could tell you it can't be replaced under warranty because it is still functional even if your range-per-charge is down by 50 percent. 

Cost To Replace a Battery in Popular EV Models

One thing is clear — replacing the battery in an electric vehicle is a costly proposition. Let's look at how much it might cost in some popular EVs. A battery replacement for a Tesla Model 3 will cost between $13,000 and $15,000. To that rather steep price - a price that could buy you a pretty decent gasoline-powered used car — you must add $1,500 to $3,000 in labor. Of course, the typical independent service shop is not equipped to replace an EV battery, so the labor is specialized and expensive. A replacement battery for a Nissan Leaf, a vehicle that has much less range than the Tesla Model 3, is less expensive but certainly not cheap. Factoring in both the cost of the new battery and labor, it will cost $7,000 to $12,000. If you use reconditioned salvage batteries, the cost might be $4,000 to $6,000. Of course, since the latter employs used batteries, the useful life of the replaced battery pack and/or the capacity might well be lower than the original specifications. Replacing the battery pack in a Ford Mustang Mach-E is an even more expensive proposition. There's a story circulating around the Web of an owner paying more than $28,000 to replace his damaged Mustang Mach-E battery. The battery itself costs more than $20,000. Obviously, a battery replacement is not something you do on a whim.

The Bottomline

The replacement of an electric vehicle battery is expensive. In fact, it is so expensive that vehicle owners should do some mathematical calculations before they simply say, "Go ahead and fix it." First, it is important to determine the value the vehicle will have after the battery has been replaced. Just as it might be foolish to put a $3,000 automatic transmission in a vehicle that is worth $5,000, it might not make sense to install a new $15,000 battery in an older EV that might only be worth $20,000. Those who decide to do so might also be well advised to determine they are going to keep the EV for years to come, because they are unlikely to recover their expense if they sell the vehicle too soon after making the swap. One thing no one can dispute — the expensive nature of an EV's batteries makes owning and maintaining an electric vehicle a different proposition than owning and maintaining a conventional internal-combustion-engine car.