Rechargeable Li-ion batteries are expensive across most industries. While not as expensive per amp-hour as camera and photo/video equipment batteries, cordless power tool batteries are often painfully pricey.
Using Makita as an example, their 40V Max XGT 4Ah battery is priced at $199 to $219 right now, depending on the retailer.
This particular battery has a nominal voltage of 36V, giving it an energy capacity of 144 watt-hours, which is comparable to that of an 18V 8Ah battery.
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At the time of this posting, Makita has a promo on select XGT cordless power tool kits and combo kits, where you save $100 and get a free bonus battery,
The kit shown here is the Makita XGT rear-handle circular saw kit, GSR01M1. If you buy this kit via an authorized dealer, it’s $299 for the saw, charger, tool bag, 1x 4AH battery, and you get a free bonus 4Ah battery.
See Also: Best-Ever Makita XGT Cordless Power Tool Deals Started Today
So that’s $299 for 2x XGT 4Ah batteries, a tool, charger, and bag.
If you were to buy the same batteries separately right now, it would be $398 at one retailer (Home Depot), and $438 at all other Makita dealers I looked at.
$438 for 2 batteries vs $299 for 2 batteries, a cordless circular saw that retails for $264 by itself as a bare tool, a charger, and tool bag.
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Makita also has an offer right now where you get a free bonus 4Ah battery with the purchase of 2 select XGT cordless power tools.
Maybe this is why replacement batteries cost so much by themselves? Something has to balance the aggressively low pricing in regular promotions.
Basically, it stands to reason that if you’re buying bare tools and batteries at full retail pricing, some of the profit balances against the low margins or even losses associated with promotional pricing. How else can a brand sell a kit with a tool, charger, battery, and bonus battery for 32% lower than the retail price for just the same two batteries?
A retail contact explained to me a long time ago that the prices you see for replacement or spare cordless power tool batteries are reflective of their true cost to manufacture, package, and place on store shelves, but there’s bound to be more to it.
I used Makita as an example here, but other brands have similar promotional offers and deals on occasion, where it’s more economical for a tool user to buy a kit or special bundle than the batteries separately.
At Lowe’s right now, buy a Dewalt PowerStack 2-pack for $199, and you get a free cordless power tool that’s valued up to $199. Home Depot has a similar promotion. You can buy the batteries for less at retailers that aren’t offering the same deal, but this does give you greater value for dollar if you could use a new tool as well.
If you don’t need a new tool, there are occasionally discounts on starter kits, battery 2-packs, and bundles.
There’s psychology at play here. Would you rather spend $160 on 2 batteries, or $199 on 2 batteries plus a tool that retails separately for $199 by itself? If I can’t justify the added expense for a deal bundle like this, I’ll likely to wait for the next promo where a discount or different bonus inclusion might be offered instead.
Compared to the camera and video industry, we have it easier. If you want to experience sticker shock, take a look at how much batteries for camera equipment costs. Whereas the Makita battery above is premium-priced at $1.48 per watt-hour, video equipment batteries can cost $4 per watt-hour and up.
With respect to cordless power tools, there are often ways to save money on batteries, or a least take advantage of deals to get more for the same money.
mike f
These are all just usually a bunch of stacked Panasonic 18650 batteries inside still aren’t they?
Stuart
Cylindrical cells might be sourced from Samsung, Panasonic, Sony, LG, or others.
With stacked-pouch batteries, cells are now custom-made to the needs and specs of power tool brands.
Brett
But why are they so expensive? The title of your article was not answered in detail.
Stuart
I put this part in bold:
Basically, it stands to reason that if you’re buying bare tools and batteries at full retail pricing, some of the profit balances against the low margins or even losses associated with promotional pricing. How else can a brand sell a kit with a tool, charger, battery, and bonus battery for 32% lower than the retail price for just the same two batteries?
I’d say that kits seem to be subsidized for the sake of competitive pricing, and certain promotions – especially during winter holiday and Father’s Day shopping seasons – could have a loss leader effect.
Ignoring that there are multiple levels of costs, markups, and profit margins, let’s say that a battery has a retail wholesale cost of $100. Let’s say the average retail markup is 50%, which would put the retail price the consumer pays at $150.
In a cordless power tool combo kit or as part of an aggressively low-priced promotion, let’s say the battery might contribute $100 or less towards the price.
How do they make money on it then?
What I’m suggesting is that this is why the retail price on a singular replacement battery might be $200 instead of $150.
When you buy a combo kit, models aimed at consumers and value shoppers might say “wow, over $500 value for just $299.” If you add up the cost of the tool(s), charger, and batteries separately, sure, it all has an inflated value.
The current promotions seem like a great example of the loss leader or subsidized promotions effect. It’s not just that the kit costs significantly less for everything individually, which is usually the case, but that the entire kit costs significantly less than the retail price for the same batteries if purchased separately.
Bottom line, if you shop carefully, and maybe have some flexibility with respect to which battery sizes you need, and when you want them, promotions can present a much better value.
Don’t buy batteries for $400 when you can get them for $299, plus some other stuff along with it.
We’ve seen this before with other types of products. Why buy 2 M12 batteries on sale for $79 when you can buy a cordless screwdriver kit with the same 2 batteries for $69?
Similar can be said about bare tools. If you are flexible on timing, you can usually get more for the same money.
If you want the Dewalt 20V Max DCS382B cordless reciprocating saw. It’s regularly $199. Right now, there’s a promo where you buy a pair of PowerStack batteries for $199 and get this saw for free.
What’s better, $199 for 2 batteries, $199 for a recip saw, or $199 for the saw and 2 batteries?
Between promos, the same saw might be $179, and the battery 2-pack $159, but they are usually bumped up to full retail during promos.
Lance
Stuart, you’ve bought into the marketing. 🙂
$/Wh is a relevant way to compare battery prices. Using the expansion battery for the Anker 767 for example, it’s 2kWh for $1000, or $.50/Wh. Apply that cost to power tool batteries and the 4Ah 40V Makita above would cost $72.
Also remember, 21700 cells were developed to make EV batteries CHEAPER than the ones using 18650s, yet the power tool brands charge MORE for their 21700 based batteries.
This is pure marketing. Don’t worry about those discount kit prices… there’s lots of margin left for profits.
Blocky
I agree with Lance. I think it’s more likely the rep was incorrect in the somewhat ambiguous assertion that retail battery prices ‘are reflective of true costs’.
It’s unlikely to be a total Xbox launch scenario, where the hardware was sold at lower than production cost to break Microsoft into the market, although it might be part of the calculation.
Your recent posts have me looking at xgt when lxt and cxt are treating me very well.
Stuart
I’m not saying that $1.48 per watt-hour for the Makita battery is good, but that in some industries, such as cameras, the pricing is far higher.
@Lance The Anker is rated at delivering 1500W max.
The Flex 24V 10Ah battery is advertised as delivering 2520 “Max Watt Output”. At $329, that stacked lithium battery is ~$1.52 per watt-hour.
An iPhone 14 Pro Max battery is 12.68 Whr and costs $99 to replace. That’s $7.8 per Whr.
Yep – 27100 cells being less expensive than 18650 cells is something we expected to happen.
I’d bet certain battery pack sizes will start to disappear.
Dewalt, for instance, is moving from offering 2x 1.3Ah batteries with their value-focused kits to 1x 2Ah. That could be because 1.3Ah cells are no longer as economical as they used to be.
https://toolguyd.com/dewalt-atomic-cordless-drills-dcd794-dcd799/
@Blocky, that was a mom & pop store owner/manager, with no reason to lie. We were talking about other things at the time, such as why they didn’t carry a particular tool brand. This was also more than 10 years ago.
blocky
@stuart
Thanks for the reply.
When I worked retail a little more than a decade ago, we generally had to make 30% markup on our cost vs price tag on the floor. On some items, we simply could not compete with online sale prices that didn’t have storefront overhead.
The occasional customer would love to wag about how this or that could be had cheaper online. But not in hand right now, I would sometimes point out.
I believe the assertion of your owner/manager that their brick and mortar shop prices were directly correlated to their cost of purchase. As the last in the chain, authorized sellers have the least flexibility in setting prices for brand-name goods (and that degree of remove provides the least insight into pricing decisions and production costs.)
… Which is to say, we can’t work backwards from that comment and presume that manufacturer pricing is also directly correlated.
I believe Makita and others can price promos so aggressively because they do in fact make a high margin on batteries pre-retail, but I wouldn’t go so far as to suppose they subsidize losses on tools with inflated margins on batteries.
I do think your end-consumer algebra is sound.
Lance
Stuart, apologies, I should have explained a little better.
The Anker 767 is a portable power station with a 2400W inverter and a 2kWh battery. It retails for $2000. The expansion battery is also 2kWh but doesn’t have the added cost of the inverter, it’s just a battery and sells for $1000.
The output of the 767 system is limited to 2400W, but that is a limitation of the inverter, not the batteries, and also doesn’t change with the addition of the extra battery (it just runs twice as long).
I chose the 767 expansion battery as an example for two reasons; one being it’s a consumer product with battery cells and a BMS to control them, and two being it’s an accessory to another product that’s needed to use it, similar to a power tool battery.
Since the cost of the cells represents the vast majority of the cost of making the battery pack, $/Wh is a very good metric to use.
Economies of scale certainly would come into play, but I’d wager that any major tool brand is buying enough cells to get a good quantity discount. I feel very confident in saying that there’s lots of margin in power tool batteries.
Since we’re talking about Makita, did anyone else notice how the price of a 40V XGT impact driver kit with 2.5Ah batteries is much higher than an 18V LXT impact driver with 5Ah batteries? As far as I can tell the cost to manufacture and get it on a store shelf should be identical to, and maybe less than, the cost of the 18V tool. They both use 10 X 18650 2500 mAh cells in their batteries, and for a given amount of power it takes less copper (half the current). The tool is only marginally more powerful, but is considerably more expensive. Good job Makita! It’s gotta be more better, I guess.
Energywonk
I’m with lance here. Wh/$ is universal metric in energy world. Batteries are not that expensive at utility scale for instance now displacing hydro and gas peakers. Batteries are highly commodified and controlled by 3 gorillas….Panasonic, Samsung and LGChem who combined have over 70% market share. Margins are thin and it’s incredibly hard to manufacture them. Tool companies are price takers. Loads of research and charts out there for this.
Stuart
@Blocky,
This was also maybe 10 years ago, when 1.5Ah and 3.0Ah batteries were about the only options.
Every holiday season, I get many numerous “have you seen deals on [less common tool]?” types of requests.
A lot of bare tools seem to be priced closer to they’re worth – or maybe higher – than the more common high-volume sellers that brands might lure new users to a platform with. Many types of tools rarely go on sale, presumably because they’re the types of tools a user is going to buy anyway.
@Lance, regarding Makita pricing, I couldn’t tell you why XGT prices are higher than 18V LXT when there don’t look to be too many differences with respect to features or components. Right now, however, the drill and impact driver kit with 2x 2.5Ah batteries and 1x 4Ah battery is lower in price than the XGT impact kit and the 18V 2-tool combo kit as well. I really think that’s a “we’ll accept very low margins or a loss” type of situation for the sake of attracting new users to the XGT system.
Why does an XGT 2.5Ah battery, with 10x 2.5Ah cells, so much more expensive than an 18V 5.0Ah battery, also with 10x 2.5Ah cells? Couldn’t tell you, but that’s why this is a “buy the lower priced promo kits and combo kits” type of scenario.
It’s counterintuitive, to buy a kit for the batteries if you need them, but it works out better for the tool user.
I’ve heard of tool users buying Dewalt and Makita cordless mowers, just for the batteries the kits come with.
Even now, the Dewalt mower kit (DCMWP233U2) is $449 and comes with 2x 10Ah batteries, and you get a free blower. The 10Ah batteries are $259 each, and there’s a 2-pack for $379. Between $379 for the 2 batteries and $449 for the kit, a difference of $70, you get a cordless mower, bonus blower, and battery charger. The mower kit ships for free from most retailers, but that’s got to eat up much of the $70 price difference.
JR Ramos
Wanted to politely point out that 21700 cells were not developed to be cheaper (not sure what that means exactly). They were developed strictly for power density and efficiency – both in terms of the magic jelly roll inside each cell, and also the overall volumetric efficiency of vehicle packs. Tesla mathed it out many times and 21700 was the sweet spot. That cell size did not exist before they willed it into existence. And of course now they are wanting to move to a much larger mondo cell, which they also are the impetus for creation.
Trying to equate a general “quality” (for simplicity’s sake) of 18650 vs 21700, I have not seen any 21700 that are less expensive than comparable 18650…usually about the same. However, there are many more 21700 models available at the moment than I think we ever saw with 18650…and by models, I also mean manufacturers/brands, and even some of the “cheap” ones have cells that perform very well and bring more to the table than even the better 18650 in years past. But looking at them on the wholesale market (contacts) the overall cost is still higher at any volume. On the retail level if you’re into buying bare cells, sometimes you can score great deals on major OEM 21700 cells when on sale. Have to keep in mind the mysteries of sourcing and grading, but generally the 21700 pricing is still the same or higher than high quality 18650.
I suppose if you start using metrics like $ per _____ then something may seem cheaper or with a different value. In packs for high drain things, though, the cost of the BMS and associated circuits really has to be taken into account as well, so comparing $/Wh of a juice pack vs. a power tool will never tell any comparative truths really.
On the subject of profit and markup…..it’s always been a mess and a ripoff. Didn’t matter whether it was NiCd, NiMH, or lithium-ion now. No other reason than perception pricing/benefits/marketing and the ability to control that pricing with proprietary connections. They have never – ever – been priced at something close to fair markup, anywhere along the chain. I say this as a pretty well trained/educated salesperson back in the day (when vendors offered a lot to us directly) and then later as a purchasing agent where I saw a variety of pricing sheets and such. It’s like filters…batteries are a tremendous cash cow and I don’t know if any company will ever be willing to give that up, no matter the profit on the tools themselves. I haven’t seen pricing sheets in some time but it would not surprise me one bit if manufacturing-to-retail price increase was in the neighborhood of 400% or greater.
In our tool store, we held fairly tight to that 33% GPM as well…the lion’s share of items were close to that, but inexpensive ones from 40% to 200% and of course power tools and compressors and machinery much, much less (often like 12% to 18% and any more would not be competitive in the market).
Lance
JR, 21700 cells were definitely 100% created to be cheaper. Not cheaper per cell, cheaper as in $/Wh.
21700 cells have 46% more volume (capacity for a given chemistry) than 18650 cells, but at the time were 9% cheaper per Wh to manufacture.
The #1 goal right now is making battery packs for cars cheaper. Tesla’s new 4680 battery will have 5X the capacity of their 21700 cells while being cheaper ($/Wh) to produce.
The new cell is so large that current flow and cooling are issues holding back progress. Both are expected to be solved by shifting from a spiral current flow to axial current flow, and from radial cooling flow to axial cooling flow. These changes require extensive changes to how the battery packs are Engineered.
Keith
Gray market batteries on Amazon for Makita are less than one third the price. I have two and they work perfectly.
Stuart
Those aren’t gray market. Gray market would be if a retailer was selling Makita batteries they purchased directly from Makita Japan rather than Makita USA. What you see on Amazon are 3rd party batteries not necessarily built to the same performance or safety standards.
Keith
The price up front is not that big of a problem. What bugs me is when the battery pack craps out after 12-18 months of minimal use.
I’ve started rebuilding my packs by scavenging cells from other packs to get up and running. Bought a $20 spot battery spot welder (uses a car battery as the power supply), and if I can get the plastic housing of the pack opened, replacing the dead cell(s) is a quick job. Might not have OEM run time, but close.
Bonnie
What battery platform are you on that’s crapping out that fast? The only one I’ve had that kind of problem with is Ryobi, and they’re so cheap it’s almost (but not actually) acceptable.
My oldest 18v battery in rotation right now is nearly a decade old and going strong. I’m a DIY’er and woodworker rather than a contractor, but still put that thing through a couple remodels.
Nate
How are you killing Ryobi packs so fast? I’ve got packs from 2013 still in service and never had one die on me. My sister managed to kill one and one of these days I’ll tear it down and analyze it.
In general, lithium doesn’t like sitting around fully charged. Pop ’em off the charger and discharge ’em a bit (a few minutes in the flashlight or fan does the trick for me) before tossing ’em on the shelf, they’ll last for years.
And definitely, definitely don’t run ’em flat. I cringe when I hear people trying to squeak out one last hole with a drill that’s groaning to a stop under low voltage. The weakest cell in the pack has already been brutally abused by that point, and all they’re doing is sealing the pack’s fate. Avoid that and they should give you years of service.
Ball_bearing
One sure way to “kill” a Ryobi battery pack, is to forget it still on the tool. If it drains below a certain level, the charger just won’t let you charge it. You can fix it, by charging the cells directly for a while, but not everyone is willing, or able to disassemble the battery pack, and connect wires directly to it. So, for most, that battery pack, just became a paperweight.
Bonnie
They still technically work, but the service time dropped so far I just gave up and bought an adapter to use a better battery instead. I only really use the brad nailer anyways, and occasionally a drill (I gave away most of the others I’d gotten as gifts), these things were not being abused.
A 3ah ryobi battery needed to be charged every few days of light use. An equivalent dewalt in the same tool lasts *months* between charges.
If the charger or the tool is killing batteries that’s a problem Ryobi caused themselves by cheaping out on the circuits. Haven’t seen that with either Makita or DeWalt in several generations.
Xrh07
Better they break at 12-18 months than 37-40.
Almost everyone offers 3 years standard warranty. Most batteries last 5-7 years on average hard use, longer with minimal use.
Kingsley
What kills them is heat. I with they had active cooling in the tools and chargers (some chargers do).
My dewalt 60V(54V) flexvolt 9″ concrete cutter eats 3/4ah batteries very fast and they come out very hot.
It should have a fan in it to blow cooler air around the battery.
Energywonk
You are spot on here. All lithium cells ramp amps down above 80% charge to keep cool as cell damage is done by higher temps at end of charge.
Dayton Rodman
I’ve resorted to doing the same thing. I use a Makita XAD05 sometimes 6 hours a day and since Makita doesn’t make anything over a 6ah battery, which is overpriced to begin with, I make my own 9ah and 12ah packs with cases I order off AliExpress. A car battery with welding board is all it takes to start welding your own cells together. Glad I’m not the only one.
Energywonk
We run a solar business. Our impact drivers and drills get worked hard 5 days a week. 5 yrs in our DeWalt stuff is fine. I reckon motors and bms etc will cr*p out before our batteries. Something is wrong here?!
J.C.
Stuart, you mentioned in the paragraph starting with “The kit shown here” that you would get a free 1ah battery. The next sentence says 2 4ah batteries. Was the 1ah a typo? Just checking. 🙂
Stuart
Thanks! Sorry, somehow 1x 4Ah ended up as 1Ah.
Yes – the bonus is a 4Ah (8Ah 18V equivalent) battery. The holiday season promo a few months ago was 2x free bonus batteries on some of the same kits and combos, but without the $100 cash savings.
With this promo, the Makita XGT GT200D promo gives you a cordless drill, impact driver, charger, 2x 2.5Ah batteries, and 1x bonus 4Ah battery, for $349.
The 2.5Ah battery is $159 by itself, and the 4Ah $199 or $219 as discussed in the post.
Meanwhile, a Makita 18V 5Ah battery (XGT 2.5Ah equivalent) is $255 for two. Why does the XGT battery cost so much more?
If you’re shopping the Makita 18V system, they have an 18V X2 cordless chainsaw kit for $399, and you get (4) 5Ah batteries with it. So, the $399 kit gives you $510 worth of 5Ah batteries.
The deeper one buys into a cordless system, the more likely they are to buy more tools and batteries.
With XGT, I just wanted the track saw as a 1-battery tool to replace the 2-battery 18V X2 test sample I had been using.
Here I’m thinking I have zero personal need for a rear-handle circular saw, but could use more batteries for the HEPA vac I recently purchased. https://toolguyd.com/makita-xgt-cordless-vacuum-gcv02zu-purchase/
Steve
It’s long been known that this is where the tool brands really make their money. They get you in their battery platform and then they have you. Some of their biggest margins are on batteries. This is why they have the headroom to offer really high percentage savings when they bundle tools and batteries in promos, because the batteries don’t cost them very much. I can’t say how I know but the markup on batteries is insane, usually several hundred percent.
Stuart
Frankly, I’ve always been highly skeptical of this. That batteries are brands’ top revenue sources is a popular assumption that I’ve never seen backed by evidence.
How many cordless power tool batteries do individual tool users purchase at *full retail pricing*?
How many batteries have YOU purchased at full retail pricing?
From what I’ve seen, most individual users, whether buying for personal or professional needs, wait for sales, special buy bundles, and other such deals. Maybe commercial buyers might be paying full price for spare batteries.
Who is buying new batteries every month?
I’ve seen retailers sell a lot of batteries during different deals and promos, but they never seem to move a lot of batteries at full MSRP pricing in between.
If you need one ASAP, you of course pay what you need to pay.
I would love to see sales figures one day.
fred
Not being privy to tool company accounting books – what they make on batteries versus tools is pure speculation. They might have better profit margins on batteries versus tools – but that’s hard to tell from the outside looking in. I can persuade myself that they may offer deals and accept lower profits on tools or kits in order to secure you as a user of their platform.
Some of the thinking about battery profits may be akin to the Gilette Razor story ( true or apocryphal ?? ) where it was said that they gave away their newly invented (1903) safety razor in order to sell their patented blades. That story at least has some verisimilitude – in that the razor was probably cheap enough to make and blades back then lasted only a few shaves – so blade sales might be huge with patents protecting their sales.
Den
Engineer here. Steve is right. There is absolutely nothing special about building batteries, the technology is well known, batteries can be built anywhere in the world for cheap and there is very little(if at all) R&D required at this point. That $200 pack cost them <$50 to make including shipping and labor. And yes, people shopping at HD and such do buy packs at full price.
Franco
I would have guessed that at the MFRing level, they would cost much less than $50 to make. A MFR, example, Dewalt, can go to Samsung, Sanyo, or whoever makes their battery cells and get ridiculously low pricing for X million batteries/year.
Steve
The MSRP gives them that headroom for the promotional pricing, and some do pay full price. But, even when you get a fantastic deal they’re still making good money on the batteries. And what I can say is, Den is pretty spot on in his commeny. Remember, with large corporate purchasing power they can get the components and raw materials cheaper than anything we see, I’m physically sitting in the middle of a large corporation’s sourcing department right now.
Jason
Power tool batteries for sure have much higher margins than tools. There’s a lot that goes into R&D, electronics, and continually upgrading them, but the cells themselves are sourced and that non-volume discounted price can generally be found online.
An average 5.0 battery is costing the big guys $15-20 to make. There’s a reason they’re frequently given away as a free item because it’s cheaper than giving away a bare tool. Plus more batteries= harder to buy another platform when you already have 10 of one colors battery.
In terms of average sales price, it’s pretty low but there are plenty of large end users that will buy tons of batteries. I once sold 2 pallets of batteries to a power utility company that was upgrading
Source: used to work for a manufacturer
charles
I’m at 10 years and counting on DeWalt 18v Li-ion packs with light usage. I used them pretty heavily for three years (I was assisting my wife with jh/hs drama work – set construction…). I think the OEM packs have MUCH tighter qc than either bare cells or third party packs. for 10+ years I worked in a hobby shop selling r/c cars etc, one of the hot sellers was battery cells and packs. the high performance Sanyo and Panasonic cells were 5x the price of the cheapies, and you got what you paid for.
Robert
Largely because we put up with the prices and buy the batteries. Similar to accepting the high mark up on light trucks. The automakers trained the general public to continue the “Chicken Tariff” of 25% long after the trade spat with Europe was over. Financial reports for US automakers almost always note light trucks are their most profitable line by far and help keep them afloat.
Brabs
A significant factor relating to cost is that tool batteries are generally not interchangeable between brands — third party and unofficial shoes excepted.
Waiting on the EU to legislate that all tool skins must be made with the same shoe so that any 3rd party battery can be fitted.
EU has recently mandated the use of usb c for all cameras, phones and tablets to stop some manufacturers charging silly prices for their usb cables.
The same has to happen for battery tools.
Jeromehoubert
The EU mandated USB C for cameras, phones and tablets is not about stopping manufacturers charging high prices for their cables. It’s all about reducing waste and the need for people to have multiple chargers that all do (essentially) the same thing.
It’s about saving the environment first. As for saving a customer’s pennies, that’s a distant second.
Josh H
Tool companies are charging $1.00-1.50 per watt-hour, meanwhile automotive suppliers (still with decent margin) are charging in the realm of $0.20-0.30 per watt hour for lower quantity customers. Those automotive packs have way more R&D put into them compared to any tool battery. Add in the additional systems that an automotive battery needs to have (cooling, self monitoring, crash protection, charge protection, etc), and suddenly the savings you get from ordering huge amounts of cells turns negligible.
Stuart, you bring up a good point that tool batteries are often bought on sale. In that case, is the storefront taking a loss on those batteries? Call me skeptical, but I think that the storefronts are getting these batteries from the tool companies at a much lower price than what we see at checkout, even when you look at sales pricings.
Stuart
There’s a huge difference in scale between EV batteries and power tool batteries.
Some if not many cordless kit and bundle promotions have got to be loss leaders, with revenue recouped with bare tool, and yes also battery purchases.
Josh H
You would be surprised by the scale on some of these EV battery companies.
For sure, companies like Panasonic or CATL are outputting way more total energy for the EV market than what the tool companies are consuming. But if you look at smaller EV battery companies (ONE comes to mind), they are able to compete with these behemoths, despite the much smaller scale they are working at. I’m willing to bet they are operating in the same ballpark as the tool companies in terms of how many battery cells they are buying.
I looked at some of the battery pricing again, and it’s even worse for smaller tool batteries. The M12 2.0 pack comes in at $2.70 per watt-hour, and that’s not even their top-of-the-line pack! With how long that pack has been manufactured, you would think it would be more in line with their M18’s price per watt-hour. It’s literally just 3 cells packaged into a plastic shell with some terminals welded on, can’t get much simpler than that.
Will
It is very annoying to deal with this in an industrial maintenance department. There is no rationale about what tools we can purchase, as we are stuck shopping the sales for batteries like we are at home. Management doesn’t want to spend hundreds on a battery, so we get stuck with heaps of tools that aren’t necessarily actually exactly what we need.
Tim W
IMO it is a long held tenet of industry, where they sell the primary item at reduced profit but sell accessories and replacement parts at high profit. The manufacturers make their profits on these ‘add-ones’.
Corey
Let me introduce you to a man named King Camp Gillette…
Mkett
Oscilating multi tool blades come to mind.
Jeromehoubert
Printer toner also comes to mind. Printers are cheap. Toner is liquid gold.
JoeM
That assumes every time we want a new battery, we’re willing to buy an entire tool kit to get it. It would honestly make more sense (you know, that thing you get when the concept, and the actions taken, meet eachother perfectly.) to stop doing the heavy promotional pricing, and just sell the batteries at a lower price, even with regular pricing.
The price for entry level shouldn’t be put at a point where it’s a scam. Buy X tool for a steal, but they have to charge twice as much for spare batteries to make a profit. If that’s how the Marketing is balancing their budgets, they’re doing more damage than they think. Price for Entry and Price of Maintenance should balance out much better than what we have. To cover all the costs, the seasonal marketing has to stop. Package Marketing especially.
Painful as it seems… The tools are built well enough these days, it’s the batteries that, due to physics, simply aren’t able to do everything on their own. They need to be kept in multiples in order to keep the tools going all day. The companies know this. It should be easier to keep to a system using many batteries. This does not help keep people employed the way it should. The expense of the tools is outweighing the rates of pay that people get. If it gets much worse, I think there will be a dropoff in the sheer numbers of tool users in the world.
Companies need to know when they’ve hit the tipping point of when they’ve gone too far with this balance. Right now? Marketing folk need to be removed, so the sensible people can undo the damage.
Stuart
There are 2 basic approaches to selling cordless power tools – brands can sell everything a la carte, or they can offer aggressive and competitive money-saving promotions. Most tool brands combine both in their marketing strategies. Sales volume also comes into play – how many cordless drills and impact drivers are sold vs how many cable staplers?
JoeM
I know that’s how they currently do it… that said… the electric staple/pin/nailer lineups are priced relatively reasonably. It’s an expensive job to have, and you’re paying for the thing to be built like a tank. The older air tools were lighter, but they posed a tripping hazard with running air hoses. That’s a tradeoff in price that is also reasonable.
We also have to ask, how many retail holidays do they have for special pricing? It’s not just the Solstice holidays, Spring, or Parental holidays… They’ve invented dozens more over the years, and alternate whether or not they get celebrated on a yearly basis. With that many of the “Sets” going out the door at a volume discount, it favours a lot of entry users. I suppose a wealthy enough Construction Company could also take advantage of these cycles to give gifts to their permanent employees, but that would be rare. Those are smaller businesses (most of the time) that need to make profit as well. And it’s in these situations where the balance is worst. What if the Company owns the tools? It’s rare, but if they’re responsible for buying both the tools, and the batteries? That’s eating up the profit for certain! How can big spenders remain loyal in the long term, when the balance is off that way?
As a whole, I know things “just are” a certain way, and we can’t really stop it due to the abundance of Big Box Retailers being “The Customer” to the tool companies. All I really need to say about it, is that this model we’re working with is both highly suspect, and extremely broken. To which I only have one solution, because I believe a complaint should be accompanied with an alternative, rather than just complaining. That solution would be to remove the sales holidays all together, and sell both Entry and Maintenance costs at a more balanced, sustainable price.
Will it happen? I doubt anyone is listening to me these days. I doubt it’ll happen. But I do have the opinion, and I have a concern over this expense. I am not only saying it to benefit myself, I care that everyone from the lowliest entry level user, up to the biggest spender, including the middle-of-the-road-spending Expert like yourself Stuart, has an equally fair chance to use all of the tools needed for their job. Ideally without going bankrupt on buying something, only to lose money on that purchase.
Weird wording… Not sure where I went wrong… Open to suggestions…
Stuart
Well yeah – of course a lot of the value combo kits and such are intended to be gateway purchases.
Cable and internet companies offer low introductory pricing and then jack up the rates. They’ll heavily discount for new customers because they know most won’t cancel and take their business elsewhere. This isn’t that much different.
With Makita XGT, this promotion is likely intended to increase adoption, and I’m sure it’s working. It’s a great strategy for them to lower the cost of entry like this, with some of the XGT options even less expensive than comparable Makita 18V kits and combo kits.
Some tool brands offer everything a la carte, but it’s not as effective, at least not when aimed at consumers.
If Brand A has a 4pc combo kit on sale for $299, and an equivalent combo kit from Brand B would cost $400 to purchase everything separately, which will sell more tools? So, the Brand B combo kit might also be $299, and the cost to buy everything separately might cost $500.
You might say that things shouldn’t be this way, but brands and retailers act on sales data. They know what works and which strategies sell more products.
Ian M
Try living in New Zealand, $552 for the Milwaukee 12amp.
MKY
Stuart –
Typo
“The 2.5Ah battery is $159 by itself, and the ** *$4Ah*** $199 or $219 as discussed in the post.”
Stuart
Thanks! *fixed*
Ct451
Lithium batteries by themselves are considered dangerous goods and don’t travel well. They need additional certifications, packaging, can’t fly on commercial planes and so on. If they are packaged with a device they will power they are not. The extra red tape probably adds to the price.
JR Ramos
They travel just fine as long as basics are taken into account, and everyone but the shady B- and C-grade resellers to this. They all come on the slow boat from overseas until a truck enters the picture somewhere on land. Freight is just a normal part of a supply chain and factored into every pricing level (on nearly everything, not just cells and batteries). This is largely true over there in the places they are manufactured, too.
There are lots of lithium-ion and lithium-metal scenarios that can travel by air, just have to be within the limits stated by the carrier. On the consumer level it’s smart to drain them down to their nominal voltage or a bit lower before shipping, even though they never check that. In the event of some bizarre mishap the less energy stored is better if an unplanned discharge occurs.
The International Postal Union and all the associated carriers and such pretty much follow the same guidelines now, although a few countries clamped down tighter (Malaysia for instance…and Canada). Right now the US is still pretty liberal about it.
Ct451
Ok, but if out of 100 channels you restrict some you are still having an affect on the price. Even shady resellers help keeping prices low.
Waylon
I’ve never purchased an individual or two pack of cordless tool batteries in the 15+ years I’ve had power tools. Right now I have mostly Makita 18v and I have at least 20 batteries that came with tools. I’ve never thrown one out because it failed. I did give my dad 3 or 4 of my oldest a couple years ago. I have several Milwaukee M12 tools with at least 10 batteries. Got a Metabo HPT brad nailer and finish nailer last year with a battery each.
Recently decided to get into Makita XGT tools. I have 5 batteries that came with the drill driver kit with free extra battery and just got the track saw kit with free extra battery.
I look for deals with extra batteries and it really pays off in the end. Can’t imagine paying retail cost for batteries.
James+C
I’m in a similar boat. I don’t think I’ve ever purchased a battery by itself.
Regarding the theory about tools being a loss leader for battery sales, I’m not sure I buy that. Maybe that could be the case for pros, but for example, Ryobi has similar tool/battery deals as say Milwaukee (at different price points). But Ryobi is likely not used as much by pros, so is the DIYer buying a bunch of Ryobi batteries? I doubt it. Ryobi has tool+battery deals all the time. The DIYer only needs say 3-6 batteries and they can easily collect that many with combo deals.
Ned
Hey are you guys in Australia?,cos I wish we had the prices you are all quoting.
Mkett
Exactly. I have makita 18v, m18 and m12 with plenty of battery packs by only buying when extra batteries are included.
Munklepunk
There is also the danger and liability is lithium batteries. The companies that produce the cells like Samsung put massive amounts of money into making them not blow up, then tool companies put even more money into making sure us monkeys who constantly use everything incorrectly don’t burn ourselves or our houses down. They really don’t want to get sued, remember the Samsung note 7? There is also a reason why we really should not buy 3rd party chargers and batteries, is extremely difficult to extinguish lithium fires
Steve L
My batteries are all OEM and were all bought in a discounted kit or Black Friday deals. I say this to make the point I have long thought batteries are indeed like the old Gillette razor blades but I won’t buy copycats.
Right now Amazon sells two Dewalt 6Ah (DCB 206) for $199. Also lists for sale a matching knockoff pair for $55 from two different manufacturers.
$199 (on sale….) vs $55.
Yep, Dewalt might be better. Why I buy OEM. But $199 vs $55 tells me Dewalt is making a lot on batteries which will recoup R&D and generate profit.
Jim T
Like most products we buy the name adds money to the cost .
So with all the major players here the battery has X cost to produce. Adding a brand name on the side of the battery adds in this case about 30 dollars to that cost.
As much as I hate to admit it I purchased no name batteries for my Makita on Amazon. Two 18 volt 6.0 Ah cost sixty bucks. Genuine Makita would be two hundred bucks.
I’m impressed with the build quality I received .
Stuart
I’ve heard a lot of bad things about 3rd party batteries, not from a branding perspective, but from engineers that test to failure.
To date, I’ve never seen UL-rated 3rd party cordless batteries, which keeps them off OHSA-complying jobsites. I also have never seen websites with custom service for 3rd party batteries.
Do you remember the hoverboard fires from a few years ago? I only buy name-brand and UL-rated. What could wrong in buying YTFJYSA branded cordless power tool batteries?
Waylon
My brother buys Dewalt tools for the guys working for him. He told me he was thinking about buying some knock off Dewalt batteries off Amazon because they were so much cheaper.
I tried to tell him not to do it but he wouldn’t listen. Can’t remember how long but probably a month or two later, someone left a battery on charge overnight in the customer’s porch. Next morning the charger was a melted mess of plastic and circuit boards with half of the battery left. The other half was individual cells burnt up in the yard several feet away from the charger. Did I mention they went through the fiberglass screen to get into the yard?
Luckily, it was sitting on a granite countertop with a tile backsplash, so not much to catch fire in the porch. Could have easily burnt the house down.
J. Newell
The problem is that you can’t see or easily test the quality issues that we care about most with LI batteries. There’s a lot that can go wrong with the cells themselves and with the charging and protection circuits. Failures can result in serious property damage or loss of life.
Joatman
The retail price for batteries is overinflated to make the kit deals more appealing. We’ve all probably bought a package deal that was too good to pass up, even though there was something in the kit we didn’t actually need. The manufacturer would much rather hook us by offering a tool/battery combo than just a battery….even at the same price. Whenever we buy a new tool, we’ve just renewed our relationship with that manufacturer.
Reminds me of the outrageously expensive should-be-illegal ink cartridge refills for printers. If you don’t need anything fancy, you can buy a new printer that includes ink cheaper for what the refills cost for your existing one. These bundles, in any industry, make it easier to switch to another brand. This could be a good thing….or bad. Depends on which side of the register your on, I suppose.
Ted
Is it fair to say that because you cant use a battery powered tool without the battery, they can charge whatever they want because manufacturers/retailers know that if your a professional and depend on those tools to make a living, and you happen to need a battery that you will most likely come to a store and buy it even if the price is so high because you cant complete the job without a battery for your tool.
Mike The Bay Rep
I find it interesting that I have not seen any responses from anyone who sells these products. I have been selling building materials for the past 15 years and I can tell you that the margins on cordless tool batteries is REDICULOUS!! They will send cases of free batteries to retailers for buying tool kits to provide customers with “free add-ons.” So, the “free” battery with that XGT saw kit came with 99 others, some of which get put on shelves to be sold at a 100% margin, especially at places like HD. Because they can buy 10,000 tool kits for a single region and they will usually receive 2 (or more) batteries, almost every battery they sell, they got for free. Also, if they actually needed to buy the batteries apart from the free ones they got with the kits, the margin on those is somewhere around 70%. Yes, this is where the tool companies make profits. But, really, it’s the retailers that catch most of it.
Looking for the free battery deals is the BEST WAY to ensure you are getting your bang for the buck you paid. Because the companies you are buying from, mine included, are profiting from those batteries.
Yes, once the tool company has you on their platform, they know you will need more batteries. Guaranteed. Nobody is going to continue swapping a battery to the tool they are switching to. They know this. We know this. So, retailers pay for the kits, sell them at a low margin, like 11-13%, but they make that up (and THEN SOME) selling batteries they didn’t have to pay for.
Fyrfytr998
Buying a battery starter kit with a free bare tool is how I amassed my tool collection.
Chip
I have never bought a battery since being as cord free as possible since 2004.
I have bought lots of promos,and either returned the promotional for $,or sold the tool.
Last year I bought 3 Makita tools that came with 4 batteries, including the mower for less than $300.
Sold the 2 saws for $130 each, and gave the mower to a friend.
Just like buying clothes or food at full price,if you save money and be prepared to spend it when sales happen.
Last week I bought packout which rarely goes on sale,acme had a 24 hr $50 off $200 deal.
Brick and mortar is the convince store/gas station, online is Wal-Mart/Dollar General for drinks.
Gas station charges $2 for Gatorade, Dg/Walmart have the same thing for50- 70% off,but isn’t as “convenient “.
JohnD
Simple, batteries are expensive to make people buy tools to get deals the include cheap batteries… at the same time they get more embedded into the companies cordless line.
Ben
I can speak to some of this from an industry perspective. I work in the power tool industry. No, I’m not going to dox myself and tell you which company I work for. Yes, there’s a lot of price gouging out there. Yes, a lot of brands make a lot of money on batteries. But there are real costs associated too. I can’t write an entire manifesto since I don’t have time, but hopefully this helps.
1. R&D costs. Batteries are potential sources of major liability. Therefore, the amount of engineering design, testing, QC, and verification is very high. You want to do as much as you can to avoid potential accidents and subsequent litigation. Most battery assembly and testing is highly automated, but that comes at an initial setup cost that must be recouped. You’re also designing a compact product to be pushed just to its limits, and no further, without going into thermal runaway. It has to take extreme temperatures, vibrations, impacts, and much more in stride, and fail safely. Again – that extensive testing and development cost needs to be recouped.
I will also add to this that the no-name brands generally do not do nearly as much QC as larger companies do, they tend to use lower-quality cells from lower-tier suppliers, and their PCB designs are often not as robust or redundant. As Stuart mentioned, they often do not have UL or other electrical certification as well. This adds cost but verifies that the design is robust and should be safe for consumers.
2. Supply chain crunches. A LOT of the battery cell market is being squeezed by the price of raw materials, especially lithium and cobalt. A lot of the major manufacturers are devoting a lot of production space to EV batteries or EV-size cells as EV demand swells worldwide, especially in China. Until new lithium sources are brought into the chain, that supply/demand crunch will be present. Most brands are highly averse – rightfully so – to sourcing from no-name manufacturers without established processes. The quality may be 90% there, but that 10% is going to literally blow up in your face if you’re not careful / lucky. They stick with the big boys for good reason.
I will also mention that the vast majority of lithium-ion cells are manufactured in China,. This is important for a couple of reasons.
3. Shipping costs. Lithium-ion products are regulated as dangerous goods by many nations, as well as the UN. This regulation varies by country, and depends on the battery’s capacity. In the US, it’s generally around 300Wh (depends on the product). Other nations – importantly, China – have stricter regulations, setting the cap at 100Wh. Batteries and cells have additional costs associated with hazmat certification, special handling procedures, etc. at every stage of the supply chain. That’s a big problem for 18V / 20V batteries at 5Ah (nominal 90Wh, max 100Wh) or above.
HTH.
Rx9
Excellent, insightful and well-organized summary. I tip my hat to you, sir.
Stuart
Agreed!
Alex
Gross profit margins for top brand tools should be very high, for batteries insanely high. I don’t think makers are doing a lot of money selling batteries though as very few costumers are buying replacement batteries.
Rx9
One factor is that tool battery cells are rated for much higher current discharge than the cells in laptop batteries. The battery management systems inside the packs are also rated for higher current.
I still suspect a lot of the price difference is marketing hype, but there are some legitimate differences between what’s inside power tool packs and consumer electronic packs.
Stuart
That’s true too, but the technologies have diverged too far apart to compare laptop batteries to cylindrical cell power tool batteries. That’s a comparison that’s going to come into play again as more power tool makers introduce pouch cell battery packs.
A lot of comparisons are made to EV cells these days, and while the discharge profiles might be very different, cell capacity and energy storage needs might not be.
Fyrfytr998
@Stuart
Which company would you say offers the best bang for your buck battery and tools currently? Where the tools and batteries don’t break your bank? Kobalt? Ryobi? Hercules new brushless stuff?
Stuart
Skil 12V/20V brushless.
I think they’ve been aggressive with pricing to try to gain market share.
Kobalt might be second, but they’ve also been very unpredictable. There are frequent sales on Ryobi.
Franco
Every business has their marketing schemes to do 2 things; increase marketspace and profits.
Cell phone companies have been known since the beginning to give free phones, to get you on their network. Then they make their money on monthly fees.
Car companies went to leasing to give the consumer lower payments
Stuart, you mentioned the batteries for camera equipment. I do not know much about that industry, but it definitely is smaller than, cars, phones or power tools. So when you say that $/watts is higher, that makes sense.
Their batteries probably cost the same or close to the same, to make as power tool batteries, but with much lower volume, need to make money somewhere.
For power tools, I am pretty sure that accessories like bags, bits, blades and all the various accessories, which, there are a lot, is the equivalent of asking if you want “fries with that”.
Problem is, you can buy a Makita or Milwaukee tool, but the market for accessories is large. So there is no certainty you will buy the same brand of accessories.
Batteries, I am quite sure that at full pop are very good profit, but again, I doubt they sell many single batteries at full retail to make great profits.
My guess is that they do not rely one thing, but a bit of everything to make their profits.
Pete Hstanulis
The answer is simple… Because the manufacturers have you by the baIIs, and they can charge (no pun intended) you whatever they want. I have been buying 3rd party batteries from China on Amazon for my Dewalt tools for a mere fraction of the price and they perform exactly like the originals that came with the tools.