Battery costs will slow electric vehicle growth -- study

The higher costs could keep electric cars from occupying more than a market niche, concludes the analysis. It finds that automakers are unlikely to reach their goal of bringing the costs of the vehicles’ batteries down to $250 per kilowatt hour by 2020.

“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,” said Xavier Mosquet, who heads the consulting firm’s global automotive practice.

The report nonetheless predicts growth in the hybrid and electric vehicle market over the next decade. It estimates that a fourth of the new cars sold in 2020 in the biggest markets – China, Japan, the U.S. and western Europe – will be hybrids or electric vehicles.

That’s about 14 million cars, but just a 1.5 million of them will be fully electric vehicles, such as the upcoming Nissan Leaf. Another 1.5 million will be so-called range extenders, like the Volt, which has a small gasoline engine to produce power for the electric motor when the battery runs low. The other 11 million will be a mix of hybrids, according to the study.

The study finds that while battery manufacturing costs will decline, the battery packs will still add a substantial amount to sticker prices, in the $8,000 to $10,000 range, in 2020. So consumers must weigh this against the gasoline savings over time from driving an electric car rather than one with an internal combustion engine.

“Even in 2020, consumers will find this price of $8,000 to $10,000 to be a significant part of the vehicle's overall cost. They will carefully evaluate the cost savings of driving an electric car versus an ICE-based car against the higher up-front cost,” said Massimo Russo, who co-authored the study. “It will be a complex purchase decision involving an evaluation of operating costs, carbon benefits, and potential range limitations, as well as product features.”