A few days ago, Ener1’s CEO said that, given sufficiently large orders to enable mass production of Li-Ion cells, the prices could drop in half, and that the savings could be passed on to the users for use in vehicles. How much of an effect would this have on something like the Volt or a completely plug-in vehicle? Not as much as you might think.

So what would it take to see prices cut in half? A huge increase in production output. Probably on the order of at least one major auto manufacturer.

So where would that leave us? Well, taking the Volt as an example. The battery pack is estimated to cost about $10,000. If the unit costs $40,000 to produce (based on the latest estimates) that means the car is $30,000 and the battery is $10,000. So if you just cut the battery cost in half, you’re only reducing the cost of the car by $5,000. Now granted, that does help out the ROI tremendously, as I’ll cover later, but its not that big of an impact with respect to the price from the consumer’s standpoint.

Likewise, the Tesla Roadster battery pack is estimated to cost at least $30,000, so a 50% reduction would only reduce the cost of the car by $15,000 - which has a current MSRP of $109,000.

So what does it take? As much as I hate to say it, time. Its going to take a few research, development and production cycles to bring the cost down. The second generations of EVs and PHEVs will bring the break-even point down from 5-7 years to 3-5 years. The decreased battery costs will help, but the entire vehicle’s systems will need an efficiency overhaul from parts to assembly. We see this now, with Honda working on its second generation IMA (integrated motor assist) hybrid technology for the future Civic hybrid and the new Insight II that is due to be revealed sometime soon (next few weeks). Likewise, Tesla’s 1.5 powertrain boosted the range by about 4%, which might not sound like a lot, but it was an incremental upgrade from a electronics standpoint.

When it comes to EVs and PHEVs that are lithium-ion based, I think of three seperate checkpoints: 2011, 2013 and 2015. 2011 is when we start to see the first generation of mainstream EVs and PHEVs - the Volt and the Tesla Model S. 2013 is when the followers will bring out their first generation PHEVs and EVs, and this is where I start to see prices come down for the batteries as production capacities increase.

By 2015, we start to see the first cars of the second generation arrive, and production ramps up dramatically. This is also where we start to see advancements in the battery technology - things like substantially changing the chemistry and alterting the anode to increase energy capacity and charge/discharge speeds - really start to take hold that deliver dramatic performance increases. Altairnano has already produced their batteries for testing that have a very large charge/discharge current as well as a very high cycle count - on the order of 10,000 cycles, enough for 27 years at one cycle per day or half a million miles - far longer than the life of the vehicle. A 15kWh battery that delivers 50 miles of electric-only performance and the battery can charge completely from  a 240V/40A wall outlet in about 90-100 minutes (or about 16 miles per half hour). Combined with the gas-based generator to extend the range of the vehicle up to 350 miles per tank+charge, and a price that provides a break even within 5 years, and versions with smaller batteries and a 35mi range that will allow for a breakeven within 3 years assuming the driver can keep 90% of their travels on the battery.