Compact Power sees sharp battery price declines

By Kevin Krolicki

DETROIT (Reuters) - Costs for batteries to power a coming wave of electric cars could plunge to a quarter of current levels over the next decade and the United States could face a near-term supply glut, the chief of LG Chem Ltd's (051910.KS: Quote, Profile, Research) U.S. unit said.

Speaking at the Reuters Autos Summit in Detroit, Compact Power Chief Executive Prabhakar Patil said he was confident of booming demand for the lithium-ion battery packs for electric cars nearing launch from General Motors Co GM.UL, Nissan Motor Co (7201.T: Quote, Profile, Research) and start-ups like Fisker Automotive.

But Patil also said recent incentives extended by the Obama administration and state governments could put more battery production in place over the next three years than the auto industry can absorb with its longer development cycles.

"We will have a lot of capacity in place over the next three years as a result of these incentives. I'm not sure we're going to have that much demand in place in that time frame," Patil said.

"The question is what do you do with the idle capacity," Patil said. "If you didn't see growth on the horizon you would really be worried but there is growth on the horizon so it's a matter of how quickly does that ramp up."

Compact Power has the contract to supply the 400-pound battery packs for the Chevrolet Volt, a plug-in hybrid GM is designing to run for 40 miles on battery power alone.

The battery pack is the most expensive part of the Volt and the reason that GM has indicated it will need to price the car at about $40,000 when it goes on sale next year.

The battery pack alone is expected to cost between $8,000 and $10,000, a cost only partly offset by a U.S. tax credit of $7,500 for consumers.