More than 20 companies are now believed to be making lithium-ion batteries for electric vehicles, in part because they were encouraged by government subsidies. The United States has put more than $5 billion into electric vehicle development, about half of which has been directed toward battery research and manufacturing. Similarly, China is believed to have invested $15 billion into alternate-fuel vehicles, while South Korea has invested more than $10 billion.
"There's been a lot of government focus on supporting this industry," Hurst said. "But there has definitely not been the quick ramp-up of production and sales of EVs that people were expecting."
Survival will not be a function of battery chemistry, Holman said. Most lithium-ion batteries use a graphite anode and a cathode that can be made from a variety of lithium-based materials. Lithium manganese spinel, which is employed by the Chevy Volt, will survive, as will lithium iron phosphate, which is used by A123 Systems and several Chinese battery manufacturers. Lithium cobalt oxide (18650-type batteries used in the Tesla Roadster) will also survive because that chemistry is commonly incorporated in consumer electronics.
"You're going to see all of the chemistries get manufactured," Holman said. "There will be winners and losers in every category."
Some battery makers may be able to hang on if they can adapt to making smaller batteries for products such as e-bikes. Tens of millions of e-bikes are sold in China every year and 120 million of them are already on the road there.
Because many lithium-ion EV battery cells tend to be large (about the size of a laptop computer), however, the number of other applications for them could be limited. For that reason, analysts believe the shakeout could be significant.
"It's pretty clear there's going to be an enormous increase in lithium-ion battery production," Holman said. "But the market -- in terms of the number of electric vehicles that will be bought and sold -- isn't going to keep up with that expansion."
Ivan: You're right. The costs will undoubtedly decline as production volume rises, and that will certainly boost sales. Most analysts say, however, that the costs won't drop below $400/kWh, and may remain as high as $650/kWh, even as economies of scale kick in. (With the exception of Tesla, which employs 18650 batteries, today's costs are approximately $800-$1,000/kWh.) Assuming an optimistic cost of $400/kWh, a 40-kWh battery will still cost $16,000.
What about the costs of producing the batteries? One way to increase demand is to drive down teh costs. I am not sure what the cost breakout is but R&D must be significant. I would also expect eh electronics to manage the battery charging and discharging to be significant as well but probably very sensitive to demand. after all once the basic controls are designed and implemented with approppriate processors they are readily amenable to cost reductions liek the rest of the digital cotnrol systems have been. The matieral cost, Lithium and some alloys I am told are not so expensive either.
As we mentioned before increasing the demand by other than EV uses might also be possible. I can see homeowners adding batteries when they can store lower cost energy for use during higher cost times that depend on their local utility cycles.
Coupling batteries with wind and solar systems would also increase demand but drives the costs of the systems up significantly.
An industry shakeout is coming for sure regardless.
You're right, Rob. High expectations play a big role in this. But the analysts we talked to allowed for a wide range of possible scenarios -- a demand of 2 GWh on the low end and 20 GWh on the high end. Even at 20 GWh, however, the demand is still about 10 GWh short of the supply. As a result, companies will still be winnowed out, even under those relatively good conditions.
In reading between the lines, Chuck, it sounds like there were high expectations for the EV market that didn't come to realization. Otherwise, why would the market pump up to the point that a shakeout is coming? Have EVs been less popular than expected? If so, why? Is it the costs? Performance issues?
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