EV Manufacturers Will Need Those Loans

The U.S. Department of Energy’s decision to dole out money to electric cars makers is an important one, because if manufacturers are going to build practical, affordable electric vehicles, they’re going to need all the help they can get.

            If you missed last week’s news, the U.S. DOE said it would grant $1.6 billion in loans to Nissan, $5.9 billion to Ford Motor Co., and $465 million to Tesla Motors. (Loans to GM and Chrysler haven’t been granted because the loans are only supposed to go to “financially viable” companies, says The Wall Street Journal.)

            The financial assist for electric vehicle manufacturers (and battery makers) is critical because the auto companies need to find some way to boost EV range while lowering cost. That’s an incredibly complex pair of goals. Here’s why: Battery experts have told us on several occasions that the projected cost for lithium-ion batteries today is between $1,000/kW-hr in small quantities and about $500/kW-hr or more in large production volumes. To go distances of 200 miles or more, those experts say the batteries will need to store at least 50-60 kW-hrs of electrical energy on board. That figure could rise higher in bigger vehicles, such as Tesla’s seven-seat Model S, which is due out in 2011.

            So do the math: Using today’s numbers, a 60 kW-hr lithium-ion vehicle battery will cost somewhere between $30,000 and $60,000, depending on future production volume. Those numbers are estimates, of course, but probably realistic. Tesla’s earlier vehicle, the Roadster, employs a 53 kW-hr, 990-lb battery (see Tesla’s battery description). Tesla hasn’t said what the battery costs, but the vehicle runs about $101,500.

EV makers can cut the costs, but at the expense of range. Mitsubishi’s new EV, for example, uses a 16 kW-hr battery, has a 100-mile range and reportedly will have $47,000 pricetag.

            Funding would certainly help the situation. It enables the auto makers to start with higher production volumes, which could bring costs down. It might even help them to take a loss on some of the early vehicles.

            Experts tell us it’s a challenging task, but it can be done. Ultimately, car makers might have to reduce the range or pack more batteries on board. The good news, though, is there are answers out there, if not easy ones.