A new study contends that battery-powered electric cars and plug-in hybrids will struggle during the next decade unless gasoline prices triple.
The study, "Unplugging The Hype Around Electric Vehicles," says that unless there's significant economic motivation, the high cost of batteries could prevent consumers with ordinary incomes from sinking their money into electric cars.
"If oil prices stay where they are today, we don't see a very large market for all-electric vehicles," say Jacob Grose, an analyst for Lux Research Inc., which published the study. "The battery packs will be so big and will add so much to the price of the car that the only ones who are going to be able to afford them are a very small group of fairly wealthy, environmentally conscious people."
The study examined the future of pure electric vehicles (EVs) and plug-in hybrids in three situations — with today's oil costs of $70 per barrel, as well as with costs of $140 and $200 per barrel. At $200 per barrel, the study showed that "light" plug-in hybrids (hybrids capable of going 10 miles on battery charge) would do well, reaching sales figures of nearly three million vehicles per year by 2020. At $140 per barrel, however, the sales figure dropped to half a million.
For pure EVs and "heavy" plug-in hybrids, such as the Chevy Volt, the news was worse. Those vehicles would need $200 per barrel — nearly triple today's oil prices — just to reach worldwide annual sales figures of less than a half million vehicles.
"Even at $140 a barrel, they wouldn't sell at anywhere near the level of hybrids today," Grose says.
The bottom line, Grose says, is that electric cars and plug-in hybrids are unlikely to make up a large percentage of the world's overall auto sales if oil prices remain where they are today. At $70 per barrel, he says, electric cars will be just 3 percent of global new-car sales.
The biggest obstacle to electric vehicle success is high battery costs, Grose told Design News. He estimates that today's large-scale lithium-ion battery packs cost about $720/kW-hr for cells and about $900/kW-hr when cooling and battery management systems are included. That means a 60-kW-hr battery for a large pure-electric vehicle could cost as much as $54,000 today. (A Design News panel of experts reached similar conclusions in 2008.)
Even with higher production volume, Grose says he believes the costs will still be high. Using a so-called "experience curve" to forecast the change in price over time, Grose predicts future battery packs will cost between $420/kW-hr and $470/kW-hr. That means a 60 kW-hr battery pack would still cost nearly $25,000, he says.
"We think manufacturers will get good at making these packs," he says. "They'll get good at adding the cooling systems and at making more efficient use of the cells. But we don't see the packs going below $420/kW-hr by 2020."
For battery makers, the lack of demand for electric vehicles could also cause a supply glut. "If you look at the announced market for lithium-ion battery products for 2015, it's enormous," Grose says. "The trouble is that the government has paid to build these factories, and if electric vehicles don't sell at the necessary volumes, there's going to be an over-supply."
Lux Research's study contrasts sharply with the results of two other recently published studies. A research effort from Deutsche Bank two weeks ago said that electric propulsion would "reverse the dynamics of the world oil demand and spell the end of the oil age." And a separate study by IDTechEx stated that by 2025 "any motor manufacturer without a compelling lineup of electric vehicles is signing its death warrant."
Lux Research's study reached its conclusions by examining so-called "payback periods" and comparing the cost of operating a gasoline-burning car against the higher initial cost of plug-in hybrids and pure EVs.
"If oil prices get high enough, the economics will make a lot more sense and the vehicles will start getting adopted by the masses," he says. "But at the end of the day, if you can't afford a car, you can't afford a car, no matter how much you may want it."