Though only $878million of lithium-ion batteries are expected to be sold next year, by 2015 the industry could be worth nearly $8billion a year.

That’s the verdict of a new report from Pike Research, which predicts a rapidly growing global market for electric vehicles – and particularly plug-in hybrid and battery electric cars. This in turn will boost the lithium-ion market, largely fuelled by government subsidies, incentives and production goals.

According to Pike senior analyst John Gartner, 2012 will be the “make or break” year for electric vehicles with government support expected to wind down with a pressing need for consumers and businesses to pick up the slack to avoid over-supply.

The report suggests that hybrid cars will be slow to move away from nickel-metal hydride batteries which have served them well so far. However, there is a need to prioritise energy capacity over power density for both plug-in hybrid electric vehicles and battery electric vehicles. Ultracapacitors are expected to appear in small quantities, but as the technology becomes less costly they have the potential to replace batteries in micro or mild hybrid applications.

The report suggests that there will be a slow take up for electric vehicles and even with broad global interest they will represent less than 2.5 per cent of the world’s fleet in 2015.

According to the report, irrespective of the direction of the market, lithium-ion battery suppliers are expected to consolidate into a small number of major players that will dominate the industry with just a handful of smaller, niche companies also being involved. Those that provide the best mix of performance, reliability and cost will win out.