Why Building an Electric Car Is So Expensive, For Now

At Tesla Inc.’s ballyhooed Battery Day event in September, CEO Elon Musk set himself an ambitious target: to produce a $25,000 electric car in three years. Hitting that sticker price -- about $13,000 cheaper than the least expensive model today -- is seen as critical to deliver a true, mass-market product. Getting there means finding new savings on technology, most critically the batteries that can make up a third of a vehicle’s cost. Musk says innovations and in-house manufacturing can quickly halve that expense, while most competitors see a slower road to reach price parity with gas guzzlers.

Largely because of what goes in them. An EV uses the same rechargeable lithium-ion batteries that are in your laptop or mobile phone, they’re just much bigger to enable them to deliver far more energy. The priciest component in each cell is the cathode, one of the two electrodes that store and release a charge. That’s because the materials needed in cathodes to pack in more energy are often expensive: metals like cobalt, nickel, lithium and manganese. They need to be mined, processed and converted into high-purity chemical compounds.