If you want something to blame for the relatively high prices of the current wave of electric cars, blame the cost of batteries.
The technology required to produce the popular lithium-ion batteries used in most electric vehicles isn’t cheap, and that cost is passed on to the consumer.
Bring down the cost of batteries, and the cost of the cars themselves goes down. That makes news of falling battery prices particularly encouraging.
Reuters reports that the average price of an electric vehicle-grade battery fell 14 percent year-on-year in the first quarter of 2012.
The Bloomberg New Energy Finance Report reveals that every kilowatt-hour of a battery pack now costs $689, down from around $800/kWh this time last year. In 2009, it cost over $1,000/kWh.
For a pure battery electric car, the cost of the battery typically makes up 25 percent of the cost of the vehicle.
If the trend continues, analysts predict that by 2030, batteries could cost as little as $150/kWh, in 2012 dollars. That would bring down the cost of a Nissan Leaf’s 24 kWh battery pack from approximately $16,500 at today’s prices, to as little as $3,600 (pre-inflation).
When you consider that the 300-mile pack in a Tesla Model S currently costs around $43,000, the benefits of lower costs are clear.
Bloomberg’s figures also seem consistent with those of Pike Research, which predicted figures of between $200 and $500/kWh by 2020, based on an average decline in price of 7 percent per year.
It would also help bring down the cost of cars like the Chevy Volt. Battery prices for plug-in hybrids cost more–as much as 67 percent more–due to the greater power-to-energy performance required.
The current drop in prices is due to supply exceeding demand, as suppliers have invested significantly more in developing batteries. Current production capacity would be enough for 400,000 battery-electric vehicles – ten times the number of electric cars sold globally in 2011.
Will falling battery costs have an immediate impact on the price of electric vehicles? That’s harder to predict.
As battery costs fall the price of the cars themselves will undoubtedly follow, but demand for electric vehicles also plays a part, and development costs will currently be relatively high, given the newness of the technology.
It’s worth noting too that other factors do play a part in the cost of electric cars, such as production costs. With Nissan Leafs currently being shipped around the world from Japan, some of that cost is represented in the Leaf’s purchase price. When the Tennessee factory opens towards the end of this year and production increases, the cost is likely to fall naturally.
Overall, we’re likely to see a steady decrease in price as both electric car sales improve, production increases, and battery prices fall.
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