Rightsizing of BEV Batteries

Introducing battery 'rightsizing' strategies reduces manufacturing costs and has less impact on the environment. Can consumers be convinced?

David Leah, Senior Analyst

02 March 2022

Falling battery costs and rising energy densities have helped make battery electric vehicles (BEVs) an alternative to internal combustion engine (ICE) cars. Many BEVs can comfortably travel over two hundred miles (320 km) on a single charge, far more than the thirty miles (50 km) typical daily requirement. However, while improvements in BEV powertrain and battery energy densities are ongoing, OEMs continue to develop larger (and heavier) battery packs aimed at rivalling the range of an ICE car. Ironically, this is to the detriment of the environment. 

There are multiple variables at play here, but a rule of thumb is that the bigger the battery, the greater the environmental cost of production. Also, the heavier the battery, the more energy is required to power the vehicle. Conversely, smaller batteries have less longevity, due to increased cycling and loading during discharge. Nevertheless, the environmental benefit of making smaller, lighter, more efficient batteries is clear.

Such a strategy could dramatically reduce manufacturing costs. Reducing battery size would help OEMs better navigate supply-side disruption, including rising raw material prices and shortages. 

And crucially, stakeholders must ensure that their entire value chain is environmentally sustainable. In Europe, the European Commission will update the Battery Directive to help reduce the social and environmental impact of batteries throughout their lifecycle. Measures include a carbon footprint declaration, battery passport, recycling quotas and promoting a circular and sustainable economy. 

As BEV ownership moves from early adopters to the early majority, it risks creating a hole in government coffers. Most road transport revenue-raising mechanisms are designed around ICE, not BEV. BEVs are often exempt from paying any tax, and income from road fuel duty disappears when a driver switches from ICE to BEV. In Norway, the annual revenue loss from the rapid adoption of BEV is €2bn and growing. UK government revenue from fuel duty and Vehicle Excise Duty (VED) is £35bn per annum – BEVs do not pay fuel duty and are exempt from VED – hence much is at stake. So, policymakers are proposing dynamic ways to plug the tax void, centred on energy efficiency, and emission reduction. Pay-per-mile road pricing, a weight tax, and a luxury tax on high-end BEVs (with big batteries) are all being considered. 

Given this and the growing requirement for stakeholders to consider their environmental footprint, the argument for OEMs to pursue a ‘rightsizing’ strategy gains strength. 

But, only a handful of OEMs are pursuing this strategy, the most high-profile being Honda and Mazda. Other OEMs are not yet following suit out of a desire to satisfy consumers’ perceived range concerns. This is reflected in the market. Some OEMs do offer smaller battery variants, but buyers have tended to favour higher trim models with larger batteries. 

Range anxiety is completely relatable to me because range was one of my chief concerns when I went shopping for a BEV. However, I wonder if my focus on this feature was irrational, considering that I rarely drive more than thirty-five miles a day. This type of behavioural bias is a key factor of range anxiety, but it will lessen over time. This will not be just because batteries are getting better but also because consumer confidence in BEV capability will grow. Helped by an improving public charging infrastructure, we will see more customers choosing vehicles with batteries that are rightsized for their travel habits.

Pursuing rightsizing could reduce a brand’s competitiveness, given that consumers will continue to over-estimate the range they need for some time. So, there is no ‘one-size-fits-all’ and rightsizing will remain a better option for some OEMs, certain segments, and certain applications, as well as for OEMs who target environmentally conscious consumers. 

This chart, from LMC’s Global Light Vehicle Battery Forecast, shows how battery pack size will plateau over time.