High Battery Costs will Continue to be a Major Obstacle for Electric Vehicles

As automakers prepare to unveil their latest electric vehicles at next week’s Detroit auto show, a new report from Boston Consulting Group casts a shadow on the near-term viability of EV battery technology.

In question is whether the high cost of the electric batteries at the heart of the EV revolution can be produced and marketed at a price point that will lead to acceptance among cost-conscious consumers.

The answer, according to the report, is that electric vehicles will not gain mainstream acceptance before 2020 at the earliest.

Boston Consulting Group’s head of global automotive practice, Xavier Mosquet, cites high battery costs as a primary reason. Mosquet predicts that the long-term goal of reducing the price point of lithium ion batteries to $250 per kilowatt-hour will remain an elusive one for automakers. The current cost per kilowatt-hours ranges from $1,000 to $1,200.

According to Mosquet, unless there is a significant breakthrough in battery technology, electric vehicles will not attract mainstream consumers and he claims that researchers he has spoken with see no such game-changer on the horizon.

In lieu of such a paradigm shift, Mosquet says that a dramatic rise in the price of fossil fuels, or increased governmental subsidies may be the only other factors that could entice consumers to embrace electric vehicles.

Mosquet said, Nobody so far has found the silver bullet. A number of OEMs are going to invest money and not get the return unless there is a new technology or a new oil shock.

The average 20 kilowatt lithium ion battery used in electric vehicles currently costs about $20,000. Although some predict that cost may fall to as low as $8,000 over the next decade, it is uncertain whether or not the decline will be enough to meet consumer’s expectations and cost tolerance.

The Boston Consulting Group’s report goes on to predict that, by 2020, 26% of autos sold in developed markets, such as the U.S., will eventually employ some form of battery electric power. Of those projected 14 million vehicles, however, the study predicts that about 11 million will be gas-electric hybrids. All electric vehicle sales are predicted to account for only about 1.5 million units annually.

Mosquet went on to say that the findings should not preclude automakers from developing electric vehicles. On the contrary, he said that EV’s represent a hedge against a dramatic increase in oil prices. He also said that the electric vehicle sector represents a lucrative opportunity for a few automakers as well as battery makers.

For those automakers that do pursue the market, Mosquet advises caution. What we’re saying, he concluded, is be careful.

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