Electric cars are unlikely to become cheap enough to lead to widespread uptake over the coming decade, a new study concludes.
The research undertaken by global management consultancy, The Boston Consulting Group (BCG), found that without a major technological breakthrough, batteries used in fully electric cars were likely to remain prohibitively expensive.
Although prices are expected to fall sharply over the next ten years, without a major breakthrough which would allow batteries to more efficiently store energy without increasing production costs, it is unlikely that the would hit key performance targets. The long-term cost target used by many carmakers in planning their future fleets of electric cars—$250 per kilowatt-hour (kWh)—is expected to remain out of reach.
“Given current technology options, we see substantial challenges to achieving this goal by 2020,” said Xavier Mosquet, Detroit-based leader of BCG’s global automotive practice and a coauthor of the study. “For years, people have been saying that one of the keys to reducing our dependency on fossil fuels is the electrification of the vehicle fleet. The reality is, electric-car batteries are both too expensive and too technologically limited for this to happen in the foreseeable future.”
Most electric cars in the new decade will use lithium-ion batteries, which are lighter and more powerful than the nickel-metal hydride (NiMH) batteries used today in hybrids like the Toyota Prius. Citing the current cost of similar lithium-ion batteries used in consumer electronics (about $250 to $400 per kWh), many original-equipment manufacturers (OEMs) hope that the cost of an automotive lithium-ion battery pack will fall from its current price of between $1,000 and 1,200 per kWh to between $250 and $500 per kWh at scaled production. BCG, however, points out that consumer batteries are simpler than car batteries and must meet significantly less demanding requirements, especially regarding safety and life span. So actual battery costs will likely be higher than what carmakers predict.
Despite this cost challenge, the report projects steady growth for electric cars and batteries, particularly in the form of hybrids and range-extended vehicles. Mild and full hybrids (like the early Toyota Prius and 2010 Ford Fusion, respectively), which combine an internal combustion engine (ICE) power train with supplementary electric motors to run the car at idle and low speeds; plug-in hybrids and range-extended electric vehicles (such as the next-generation Prius and General Motors’ Chevrolet Volt, respectively), which combine electric motors with a supplementary ICE to run the motors after the batteries have been depleted are expected to prove popular over the next ten years. While some fully electric vehicles (like the Mitsubishi i MiEV and upcoming Nissan Leaf), will also establish a market share.
Under the most likely scenario of the industry’s evolution, BCG estimates that 26 per cent of the new cars sold in 2020 in the major developed markets (China, Japan, the United States, and Western Europe)—or approximately 14 million cars—will have electric or hybrid power trains. That same year, the market for electric-car batteries in those regions will reach $25 billion.
“This burgeoning market will be about triple the size of today’s entire lithium-ion-battery market for consumer applications such as laptop computers and cell phones,” said Mosquet, noting that the forecast applies to all the components sold to OEMs for battery packs.
The report, titled Batteries for Electric Cars: Challenges, Opportunities and the Outlook to 2020, is a companion piece to a report BCG published in January 2009 on the future of alternative power-train technologies (The Comeback of the Electric Car? How Real, HowSoon, and What Must Happen Next). The new report’s findings are based on a detailed analysis of existing e-car battery research and interviews with more than 50 battery suppliers, auto OEMs, university researchers, start-up battery-technology companies, and government agencies across Asia, the United States, and Western Europe. The report also draws on the firm’s extensive work with auto OEMs and suppliers worldwide.
