| July 11
July 11 The cost of lithium-ion batteries used
in electrified vehicles could tumble by more than 70 percent by
2025 as rising oil prices and stringent fuel economy standards
push automakers to build more of these cars, according to a
McKinsey & Co study released on Wednesday.
Manufacturing these batteries on a larger scale represents
one-third of the potential price reduction by 2025, McKinsey
said. The expected influx of companies in the sector and new
technology borrowed from consumer electronics makers like Apple
Inc would also help cut lithium-ion battery costs, the
"Cheaper batteries could enable the broader adoption of
electrified vehicles, potentially disrupting the transportation,
power and petroleum sectors," McKinsey wrote.
McKinsey predicts the price of a complete lithium-ion
battery pack could fall from between $500 and $600 per kilowatt
hour now to about $200 in 2020 and to $160 by 2025.
If gasoline prices hover around $3.50 per gallon or higher,
automakers that purchase batteries at $250 per kilowatt hour
could offer electrified vehicles that can compete with cars and
trucks powered by advanced internal-combustion engines, which
are now significantly cheaper.
Battery costs represent one of the main hurdles to the
widespread adoption of low-emission vehicles, analysts say. The
U.S. Department of Energy has set a goal to reduce the cost of a
battery pack to $300 per kilowatt hour by 2014.
The 23-kilowatt-hour battery used in Focus Electric, Ford
Motor Co's first electric passenger car, can cost between
$12,000 and $15,000, Chief Executive Officer Alan Mulally said
at a conference in April. That suggests Ford paid as much as
$652 per kilowatt hour.
Higher volumes are the biggest factor in falling battery
prices, McKinsey consultants said. Prices could also drop if
battery makers refine their manufacturing process and use
standardized equipment, they said.
"Regulation around the world, not just in one region, is
getting increasingly stringent," McKinsey consultant Russell
Hensley said in an interview.
Hensley, who helped write the study, said the new standards
expected to be in effect by the mid-2020s are too strict for the
internal combustion engine to meet.
"If you want to play in the automotive markets around the
world, you actually need vehicles that are emitting less
carbon," Hensley said.
Battery costs will also fall as the consumer electronics
industry, led by companies like Apple, keeps making rapid
breakthroughs in expanding the life and power of lithium-ion
batteries, according to the study.
Over time, those improvements will work their way into
vehicles, said McKinsey consultant John Newman, who is also an
author of the report. Batteries in the consumer electronics
sector are available today for about $300 per kilowatt hour.
"It's the consumer electronics industry as much as any other
industry that's driving the costs lower," Newman said.