Oil prices and sales of green cars are fundamentally linked, and if last summer was any proof, high oil prices do deliver a boost in sales of fuel efficient and hybrid cars. But that relationship falters if the green car tech is just too expensive. According to a report from Lux Research, even in a world where oil costs $200 a barrel in 2020 just 4 percent of vehicles sold globally will be electric vehicles and plug-in hybrid electric vehicles because of the high costs of the battery technology.
This forecast reflects a bet that the price of lithium-ion batteries for vehicles will remain pretty high. Lux thinks that lithium-ion cells for vehicles will drop to between $405/kWh and $445/kWh in 2020 from their high of $720/kWh today — not a massive improvement.
The high price of lithium-ion batteries isn’t a shocker to the car markers. Last month Toyota said that after three years of testing, it’s decided lithium-ion technology still isn’t ready for prime time in the regular hybrid (as opposed to plug-in) Prius because the batteries are still too expensive.
The high price of lithium-ion batteries is also one reason why companies are building interesting business models around getting electric vehicles and charging infrastructure deployed. Most notably, Better Place, the electric car charging infrastructure company that is looking to offer low-cost cars to consumers in exchange for a subscription service like a cell phone plan. The head of Better Place Denmark, Jens Moberg, told the UK Guardian that he doesn’t expect industry battery manufacturing costs to drop below €8,000 ($11,440) per battery until after 2012, when higher production volumes could help lower costs. Better Place is working with A123Systems (s AONE) and AESC to develop batteries.
Interestingly, the Lux report suggests that batteries required for hybrid vehicles — and to some extent plug-in hybrid vehicles — are economical enough to be a viable option for consumers by 2020 and will be highly affected by oil prices. A lithium-ion battery in a hybrid or plug-in vehicle is smaller, and cheaper, than that needed for an all-electric vehicle, and many hybrid makers are using cheaper technology like nickel-metal hydride. Lux says plug-in hybrids could sell 3 million units per year by 2020 if the price of oil was at $200 per barrel. Hybrids will sell that many by 2020 regardless of oil prices.
Still, sales of lithium-ion batteries will slowly start to ramp up in the coming years, thanks to the combined sales of plug-in hybrid, hybrid and electric vehicles. But that trend will also depend on oil prices. At $70 per barrel in 2020, sales of li-ion batteries for vehicles will hit $510 million, but with the price of oil at $200 a barrel, the market for li-ion vehicle batteries could skyrocket to $9 billion.
Photo courtesy of Toyota.