Goldman Sachs: Lithium is the New Gasoline, Tesla is leading the way [Video]
Could gasoline be under siege from electric vehicles? Well... a few weeks ago, Goldman Sachs* published an intriguing youtube video titled, Lithium is the new Gasoline. Deciding to dig a little deeper, I uncovered a corresponding Emerging Theme Radar report from Goldman Sachs' Equity Research division. The report highlighted Tesla Motors [NASDAQ: TSLA] as a leading catalyst for the transition from gas-powered cars to lithium-ion powered battery electric vehicles (BEVs).
Hmmm, lithium replacing gasoline? According to Goldman, yes... it could be "a key enabler of the electric car revolution and replace gasoline as the primary source of transportation fuel. Oil derivatives have been the primary source of transportation energy since the commercialization of the internal combustion engine. However, thanks to technology breakthroughs, favorable policy and supportive public opinion, electric vehicles (EVs) appear poised for a sustained period of superior growth with our autos team estimating 22% EV penetration (BEV, PHEV, and HEV combined) in 2025 from under 3% today."
How big is this opportunity? "Despite its almost universal acceptance in portable electronic devices today, we believe that the greatest opportunity for lithium-ion batteries lies ahead in the form of transportation applications. In 2014 alone, more than 70 million cars were sold globally, providing an enormous available market for lithium-based batteries... A typical cell phone uses 5-7 grams of lithium carbonate equivalent (LCE) in its battery. A TSLA Model S with a 70kWh battery uses 63 kilograms – an equivalent content of more than 10,000 cell phones."
Source: Goldman Sachs*
In order for this transition to occur, Goldman states that battery costs must decline and cite Tesla as a key driver, "Average battery costs have declined approximately 14% per year over the period from 2007-2014 from over $1,000/kWh to $410/kWh. Costs for the leading BEV manufacturers are even lower at $300/kWh. However, even at leading manufacturer rates, the implied cost of a 70kWh battery pack in a Tesla Model S is still well above $20,000, a level that likely prohibits usage in mass market automobiles. According to Nature, $150 kWh is the level widely perceived as the point of mass-market commercialization for BEV. If costs continue to fall to the $125 kWh level targeted by TSLA in 2020, then 70kWh battery packs become more manageable at around $9,000. We believe this is key to adoption."Along with electric vehicle adoption and battery cost decreases, Goldman also cites battery storage as another key catalyst and points to Tesla once again: "the ultimate winner in the race for grid storage applications is unclear today, but incumbent battery technologies like lithium-ion have a competitive advantage due to their scale. In small use applications such as Tesla’s Powerwall pack, we expect lithium-ion batteries to remain competitive."
And, Goldman Sachs is not alone. The Wall Street Journal cited Wood Mackenzie research that electric vehicles could cut U.S. gasoline demand by 20% in the next two decades. And, Parajit Ghosh, author of the Wood Mackenzie report explained that, "The [Tesla] Model 3 is planting a flag. With time, it has the potential to be a disruptive force in the market." And, the International Energy Agency also cites steep electric vehicle growth with battery cost declines led by Tesla Motors. Regardless of whose timetable is correct, it's clear that electric vehicle growth could disrupt the reign of fossil fuels. The one constant in all these findings: Tesla is leading the way.