Commercial Vehicles July 2021

Powertrain Accounts For Up To 80% Of Total Vehicle Cost For Chinese EVs

Maya Xiao
Maya Xiao

Maya has an interdisciplinary technical background in vehicle electrification, system automation and robotics. Based in China, she is the lead analyst for Interact Analysis’ Li-ion battery and forklift research, also covering markets for industrial and collaborative robots.

The purchase price of an electric commercial vehicle in China is currently about double that of a conventional ICE vehicle. But that is set to change. Here, we lift the lid on the drivetrain component industry as it relates to commercial vehicles, identifying factors which we believe will drive down prices. 

The main cost element? The battery, naturally…   

It’s no surprise that it’s the high cost of powertrain components which has driven up electric commercial vehicle pricing. Let’s start with light duty vehicles: our researchers have found that in a Chinese light-duty vehicle in the 4.5 ton range, the powertrain accounts for 70-80% of the total vehicle cost. For a similar conventional vehicle, it’s 50-60%. And a typical 100 kWh battery for this vehicle accounts for 70-80% of the total cost of the powertrain.    

It’s a similar story for heavy duty vehicles. To take sanitation vehicles as an example, the price of electric models is more than double, and sometimes triple, that of equivalent conventional sanitation vehicles. It’s the chassis that brings the cost (the chassis of a heavy-duty vehicle will tend to have the powertrain built in), usually accounting for 75-80% of total vehicle cost. And the battery alone accounts for half of that. This is a big difference to conventional vehicles, where the chassis (including the engine) makes up only 50-55% of the total cost. 

The technological challenge – reducing price and increasing power: size matters

Let’s start with the all-important battery: lithium iron phosphate (LFP) batteries are used to power commercial vehicles in China. And their unit price has dipped significantly over the past 6 years, from $2.81 per watt in 2014 to $0.791 in Q1 2020. We believe this trend will continue for a range of reasons. Firstly, technology always advances. The energy density of LFP batteries will continue to increase, and innovative battery technology has led suppliers like CATL to contemplate direct cell to pack battery production (traditionally, the process has been cell to module to pack).

Taking the module out of the battery production process reduces volume – removing modular battery packaging such as plastic and rubber – and improves efficiency and lowers costs. But the big benefit is space savings. Cell to pack could offer a good solution to the energy density problem, bringing down battery prices in the process. Battery cost will be further reduced as the automation of Chinese battery factories spreads.   

Trends for other powertrain components – costs are going down across the board

We also expect the cost of other powertrain parts, such as motors and drives, to see progressive price drops. There are increasing numbers of producers of these components entering the market, intensifying competition. Interestingly, we have observed that the component supplier field is widening. While traditional suppliers such as Bosch continue to service the electric commercial vehicle sector, companies such as Inovance and INVT, major suppliers of motors and drives for industrial automation, have moved in on the EV component supply market, and have made a significant impact.                                                                     

New technologies are not only transforming battery design. Electric motors are also evolving. The flat wire motor concept (where flat wire replaces circular wire in the stator) has already successfully been used in electric passenger cars. Using flat wire reduces the amount of copper required, and also results in a stronger magnetic field and increased power density. Though as yet only used in private cars, this technology will spread to the commercial vehicle sector.

Currently, direct drive motors, i.e. without transmission, are the predominant solution employed in the Chinese electric commercial vehicle market. This means that to achieve a higher torque, larger motors are needed. We expect to see the introduction of transmission technology into this sector, which will mean larger vehicles will be able to be equipped with smaller, lighter, and less expensive motors. We also expect to see the appearance of the e-axle for light- and medium-duty trucks, requiring fewer drive components than a centralised motor, and again driving costs down.

Cooperation is the name of the game, but we expect to see a scramble for batteries

We have witnessed considerable strategic cooperation between OEMs and leading component suppliers as OEMs strive to guarantee supply and lower the purchase cost of their products. We envisage scenarios where battery factories in the process of being built will have already had 5 to 10 years’ worth of orders in their books before a single battery has rolled off the production line. It’s a tough market for OEMs, as we now see a situation where battery suppliers are not afraid of losing customers. Nevertheless, battery price drops over time are assured.

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Posted in: Commercial Vehicles.