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While Tesla Motor (s TSLA) execs are heads down developing a massive battery factory that can lower the cost of batteries for its cars, the analysts at Lux Research believe that Tesla can significantly lower car costs by turning to more efficient next-generation power electronics, beyond the standard use of silicon. Lux said that advanced, more efficient power electronics can reduce the energy used by the battery by 20 percent, which means the cars can use a smaller battery, and reduce overall cost of building a car by 8 percent, which would be $6,000 off the cost of the Model S.
These next-gen power electronics can be made from “wide bandgap semiconductors,” like silicon carbide and gallium nitride. These materials can operate at higher temperatures more efficiently, and Lux Research said in a report released Tuesday that silicon carbide, which is closer to market than gallium nitride, could displace silicon used in power electronics in electric vehicles by 2020.
Are these materials being made in sufficient volumes to hit the projections of Tesla’s growth in its cars? The company wants to build 500,000 cars by 2020. Of course, this all depends on how quickly these markets can develop. But perhaps if Tesla became a substantial customer, it would push these markets for next-gen power electronics for electric cars.
Some startups and university researchers are trying to make gallium nitride and silicon carbide more economical. Transphorm is making power electronics devices from gallium nitride. The Department of Energy, through its ARPA-E program, awarded grants to projects using wide band gap semiconductors for power grid applications.
Other electric car makers like Nissan and GM, which are building cars with smaller, less powerful, batteries, might not see these same types of cost and energy savings with these power electronics. The energy savings would have to be greater than five percent to benefit the cars with smaller batteries, and it could be as low as two percent for a Tesla car.