## BCG Report Expects Battery Costs Will Constrain Widespread Market Adoption of Fully Electric Vehicles, Absent a Technology Breakthrough; Forecasts 26% of Major Market New Cars in 2020 To be Hybrid or Electric

##### 08 January 2010
 As an example of cost direction, BCG forecasts that NCA cell and pack costs will decline 60-65% by 2020. Source: BCG. Click to enlarge.

Although lithium-ion cell and pack costs are expected to fall sharply by 2020, they are unlikely to drop enough to support widespread adoption of fully electric vehicles without a major breakthrough in battery technology, according to a new study by The Boston Consulting Group (BCG).

Despite this cost challenge, however, the report projects steady growth for hybrid and electric cars—including mild- and full-hybrids; plug-in hybrids; extended range electric vehicles; and fully electric vehicles. Under the most likely scenario of the industry’s evolution, BCG estimates that 26% of the new cars sold in 2020 in the major developed markets (China, Japan, the United States, and Western Europe)—or approximately 14 million cars—will have electric or hybrid power trains. That same year, the market for electric-car batteries in those regions will reach $25 billion. Of the roughly 14 million electric cars forecast to be sold in 2020 in China, Japan, the United States, and Western Europe, BCG projects that some 1.5 million will be fully electric, 1.5 million will be range extenders, and 11 million will be a mix of hybrids. The new report, Batteries for Electric Cars: Challenges, Opportunities, and the Outlook to 2020, concludes that the$250 per kWh long-term cost target used by many carmakers in planning their future fleets of electric cars is unlikely to be achieved unless there is a major breakthrough in battery chemistry that substantially increases the energy a battery can store without significantly increasing the cost of either battery materials or the manufacturing process.

The study, a companion to one released in January 2009 that analyzed the technical and cost tradeoffs of competing alternative power-train technologies, addresses the two principal variables in BCG’s analysis of the developing market for electric cars: the technical attributes and the costs of lithium-ion batteries for electric-vehicle applications.

Given current technology options, we see substantial challenges to achieving this goal by 2020. For years, people have been saying that one of the keys to reducing our dependency on fossil fuels is the electrification of the vehicle fleet. The reality is, electric-car batteries are both too expensive and too technologically limited for this to happen in the foreseeable future.

—Xavier Mosquet, Detroit-based leader of BCG’s global automotive practice and a coauthor of the study

The authors drew on BCG’s work with automotive OEMs and suppliers and on a detailed analysis of the relevant intellectual-property landscape. They conducted more than 50 interviews with battery suppliers, automotive OEMs, university researchers, start-up companies working on leading-edge battery technologies, and government agencies across Asia, the United States, and Western Europe, and also created a battery cost model to project future costs.

The report explores four main questions:

• What technological challenges must be overcome in order for lithium-ion batteries to meet fundamental market criteria?
• As battery technologies reach maturity, what might their cost profiles look like?
• What will electric vehicles’ total cost of ownership (TCO) amount to?
• How are industry participants likely to align themselves as they jockey for position in the evolving market?
 Tradeoffs among five principle Li-ion chemistries. Source: BCG. Click to enlarge.

Technology.The BCG authors did not address the impact of new battery chemistries, lithium-based or otherwise, “because none of the players we interviewed expect that batteries based on new chemistries will be available for production on a significant scale by 2020.” However, the authors note, “there is increasing interest and activity, particularly among university research laboratories, in exploring new electrochemical mechanisms that might boost the specific energy and performance of future batteries.

The report explores five principle chemistries—lithium nickel cobalt aluminum (NCA); lithium nickel manganese cobalt (NMC); lithium manganese spinel (LMO); lithium titanate (LTO); and Lithium iron phosphate (LFP)—along six dimensions: safety; life span (measured in terms of both number of charge-and-discharge cycles and overall battery age); performance (peak power at low temperatures, state-of-charge measurement, and thermal management); specific energy (how much energy the battery can store per kilogram of weight); specific power (how much power the battery can store per kilogram of mass); and cost.

Without a major breakthrough in battery technologies, fully electric vehicles that are as convenient as ICE-based cars—meaning that they can travel 500 kilometers (312 miles) on a single charge and can recharge in a matter of minutes—are unlikely to be available for the mass market by 2020. In view of the need for a pervasive infrastructure for charging or swapping batteries, the adoption of fully electric vehicles in 2020 may be limited to specific applications such as commercial fleets, commuter cars, and cars that are confined to a prescribed range of use.

—BCG Report

Cost and TCO. Even if battery makers can meet the technical challenges, the authors wrote, battery cost may remain above the $250 per kWh target. Citing the current cost of similar lithium-ion batteries used in consumer electronics (about$250 to $400 per kWh), many original-equipment manufacturers (OEMs) hope that the cost of an automotive lithium-ion battery pack will fall from its current price of between$1,000 and 1,200 per kWh to between $250 and$500 per kWh at scaled production. BCG, however, points out that consumer batteries are simpler than car batteries and must meet significantly less demanding requirements, especially regarding safety and life span. So actual battery costs will likely be higher than what carmakers predict.

To show how battery costs will decline, BCG uses the example of a typical supplier of lithium-nickel-cobalt-aluminum (NCA) batteries. BCG’s analysis suggests that by 2020, the price that OEMs pay for NCA batteries will decrease by 60 to 65%, from current levels of $990–$1,220 per kWh to $360–$440 per kWh. So the cost for a 15-kWh NCA range-extender pack would fall from around $16,000 to about$6,000. The price to consumers will similarly fall, from $1,400–$1,800 per kWh to $570–$700 per kWh—or $8,000–$10,000 for the same pack.

Even in 2020, consumers will find this price of $8,000 to$10,000 to be a significant part of the vehicle’s overall cost. They will carefully evaluate the cost savings of driving an electric car versus an ICE-based car against the higher up-front cost. It will be a complex purchase decision involving an evaluation of operating costs, carbon benefits, and potential range limitations, as well as product features.

—Massimo Russo, a Boston-based partner and coauthor of the report

Industry Dynamics. The report envisions two possible scenarios for significant strategic alliances in the industry: one in which OEMs forge new alliances with cell manufacturers, and one in which they stick with tradition by buying batteries from Tier one suppliers that, in turn, may forge their own alliances with cell manufacturers.

The electric-vehicle and lithium-ion battery businesses hold the promise of large potential profit pools for both incumbents and new players; however, investing in these technologies entails substantial risks. It is unclear whether incumbent OEMs and battery manufacturers or new entrants will emerge as winners as the industry matures.

As it stands today, the stage is set for a shakeout among the various battery chemistries, power-train technologies, business models, and even regions. OEMs, suppliers, power companies, and governments will need to work together to establish the right conditions for a large, viable electric-vehicle market to emerge. The stakes are very high.

—BCG report

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BCG may underestimate battery technology evolution. A Japan Group has already developed a potentially much lower cost roll to roll PRINTED combo solar cell - battery that could evolve into many new applications.

Transparent window panes that could simultaneously covert sun energy and store it for night time use or to recharge PHEV-BEV on-board batteries could be possible by 2020/2030.

Next generation (not neccessarily lithium) batteries may have 5 to 10x the energy density and 1/40 the cost of current lithium batteries by 2020/2030.

Much better storage units at much lower price will be developed in the next 10 years. Any forecast based on current lithium batteries will likely be unreliable.

"Although lithium-ion cell and pack costs are expected to fall sharply by 2020, they are unlikely to drop enough to support widespread adoption of fully electric vehicles without a major breakthrough in battery technology, according to a new study by The Boston Consulting Group (BCG)."

So what else is new.

The 1997 Rav-4 EV-95 battery already has over a dozen years of proven 100 mile per charge performance.

If batteries (EV) have improved by just five percent per year(no where near Moore's Law's ~40%/year electronics improvements), range should still be over 80% better - not to mention large cost reductions with mass production.

Every ICE car with a starter/alternator electrical system is a hybrid anyway, so enlarge the electric motor and eliminate the transmission - enlarge the generator and range extend with a cheap 40 hp constant speed Wankle, if needed.

Then, use 20 percent of the 1997 EV cell technology if new battery costs are still so incredibly high.

The motor/battery have the needed torque for acceleration and it only takes ~20 hp to maintain 70 mph.

Thus, a typical new vehicle price with a fraction of present fuel use and without range anxiety.

Likely, many GCC readers can envision better combinations than present gas-guzzling 1000-moving-part ICE offerings.

Just to point out the news, since the authors of report apparently aren't keeping track of the news..... the Nissan Leaf, available for purchase later this year, will have a total cost of ownership of equal to or less than an equivalent regular car, with current low prices of gasoline. This report is out by .... oh .... 10 years. I believe we're getting close to that $250 point now anyways, wait until mass production ramps up. Considering the 10 trillion dollar market awaiting manufacturers who can make competitive EV's, I have a hunch we will be seeing some very interesting innovations in the near and medium term future. Go back 10 years and show luddites like the authors of this report what an iPhone of today can do ... they'd scoff. In 2020 the cost of gasoline will be, most likely, much higher than it is today (without huge new discoveries of oil). That will change the EV equation. Mark... the leaf rents the battery for about as much as a car and then also sells you the car itself for about as much as a normal car so um no. "The report explores four main questions:" which equals the four sides of a box they didn't let themselves think outside of. I certainly hope batteries advance faster than this – otherwise it will be a dismal 10 years. But there is no reason we are entitled to apply Moore's Law * or assume batteries “must” improve by 5% per year * or assume mass production will necessarily provide large cost reductions. And, as wintermane says, the Leaf is a pig in a poke. I really believe some of the MANY that are working world wide toward major breakthroughs in battery technologies will succeed – many are thinking outside the boxes (both 4 and 6 sided) – necessity is the mother …. "the leaf rents the battery for about as much as a car and then also sells you the car itself for about as much as a normal car" Where did you get that info? I'm following the Leaf closely and as far as I know they haven't released any specifics on the battery lease, other than to confirm that the total cost of ownership of the car will be equal to or less than an equivalent regular car. Therefore, they couldn't lease the battery for as much as a car (on a$12,000 battery?!?!?!?), otherwise they would be lying about their "total cost of ownership".

"But there is no reason we are entitled to apply Moore's Law"

I think the 10 trillion dollar potential market may provide some incentive. Is anyone here inside Nissan? How do we know what they are or aren't developing? Sorry, but GM's batteries are no indication of what Nissan is doing internally. Considering the commitment a large automaker like Nissan has put behind EV's, I have a feeling they may be somewhat optimistic.

http://www.autospeed.com/A_110994/cms/article.html

Interesting article about electric assisted turbos. The unit can add boost like a supercharger at low engine speeds, work as a turbo at middle rev ranges then act as a generator to prevent overboosting while cruising with the power available on demand if required.

WRT battery prices they will get cheaper and are already much lower than this report makes out. With improved battery technology, lightweighting, advanced areodynamics and use of supercapacitors to buffer the main battery pack you will need less kWh to get the same range.

Mark I think your confusing what nissan hopes to do in the future with what they plan at the start. They hope to get the costs down to the same as a normal car eventualy not right now.

Do these guys know what they're talking about? In their comparison of five lithium ion battery technologies they compared four cathode materials, NCA, NMC, LMO, LFP, and one anode material LTO. Doh! What's the cathode material used with the titanate-oxide anode, cobalt-oxide?

Can one provide a majority of mass production examples NOT resulting in large cost reductions?

With overall human knowledge and computing power doubling every few years, a 5% annual improvement in a highly funded, focused technology like batteries is pretty minimal - unless maybe one's still using Windows 98.

Look the BCG is basically a rent-a-prof type of organisation isn't it? You pay them money and they will come up with a "scientific" report that suits your needs. We've seen it all before just recently with the National Research Council battery bashing exercise. It followed the same pattern: exaggeration of present price level of batteries combined with a very conservative estimation of the possibilities for future price drops. Turned out the hydrogen mob was behind this report so now we have to find out who paid for the BCG report to get an idea how credible it really is.

Chris O may have a realistic approach to evaluating the tremendous problems always facing EVs.

A recent press release from BYD dated 30 December 2009 say that the all electric e6 will have a plus 200 miles range and cost about 40.000 USD in the US including the battery.(1) If this is confirmed at the Detroit autoshow next week it means BYD can produce automotive grade batteries today for about 333 USD per kWh. The plus 200 miles range requires minimum a 60 kWh battery for the 2.3 ton e6. The e6 will cost 20.000 USD to produce not including the battery so that leaves 20.000 USD for the battery or 20.000/60 = 333 USD per kWh. That battery price is including profits and packaging.

BCG will have us to believe that automotive grade batteries cost $1,400–$1,800 per kWh at the consumer level. That is 4 to 5 times the price that BYD seems to be able to handle this year with their e6. The e6 should go on sale in May 2010 but whether that will include the US or just China is not clear. I think it is the US as another press release from BYD says the e6 will go on sale in China in the first quarter of 2010.(2)

1) http://www.bydit.com/doce/news/press/981.html

2) http://www.bydit.com/doce/news/press/983.html

Batteries are still too expensive.

There seem to be many claiming 20 years until EVs really make a difference.

I don't care - it’s just talk - time will tell.

And someday soon one of BYD's promises will come close to reality.

- EXCEPT - UNLESS - "they" screw up our future in some huge costly endeavor that bankrupts us and/or they prevent the speedy evolution to EVs or FCVs and even much improved ICEs. But someone NOT pursuing something (as with GM & the EV1) does not prevent it’s evolution.

Although controller costs are dropping rapidly they are not the problem and batteries do not contain Windows or any other software.

Moore's law is a trend applicable to many fields but not all, for instance lead-acid batteries have about doubled in price in the last 6 years with no change in performance (Li-Ion batteries are probably the next step, maybe not).

You should consider that world wide, MANY people / institutions / companies are desperately trying to find the affordable battery (and affordable nuclear fusion power and cheap PV cells, etc.). Everyone knows there is a multi-billion dollar potential market - no one can rationally believe that none have realized that costs will drop by some limited amount if they are mass produced or that Moore’s law MUST make it happen.

No one has said that Moore's Law is a law of physics or that it MUST happen, but, so far, about fifty years of electronics circuits have achieved 40%/year density/performance advances. These integrated circuits (ICs) and computers are programmed to control many physical systems, even automobiles.

Perhaps the real IC power is that these ICs don't just control, but simulate.

I'm not a biologist, but aren't genomes now solved by computer and then only confirmed with biology?

There aren't many test tubes in a Craig Venter video, just banks of computers. What battery chemistries can't be simulated and tested before production?

In other words, the 1990's Big Auto/Oil they "don't work/too expensive" electric battery argument is now an even bigger lie.

Blame politics and buyout bankruptcies - not electric technology.

Yes, we can sit here and debate about how fast battery cost will come down to be "competitive" with regular cars. And Big Oil can fund all the biased studies it wants to try to sway public opinion.

But the fact remains that only a few EV's need to get to market. Then everyone will have a friend of a friend who has one. The word will get out about how much better they are than regular cars. Soon a significant portion of the population will have had a chance to ride in one. And this year when Nissan releases the Leaf and people realize that you can get this increased value at no more cost than a regular car, the cat will be out of the bag, and no amount of Big Oil manipulation will be able to change public opinion because people will be able to experience with their own eyes and bodies that it isn't true.

Then the only thing left for Big Oil to do will be to promote misinformation about how producing electricity is worse for the environment than burning gasoline, but this will again land on deaf ears because people's wallets will tell them that spending $25 a month to charge your car is better than$200 to buy gasoline. This will be happening later this year!

"Go back 10 years and show luddites like the authors of this report what an iPhone of today can do ... they'd scoff."

Right. Or go back ten and suggest a portable info device like an iPhone and all its capabilities. These reports are generated to make money for the authors. They don't have to have anything of value in them.

Mark is right on about how word of mouth will spread the EV news. Doesn't matter how cheap ICEs get... I can buy a CRT TV for $40.00 - do I WANT one?? One more thought: cold snaps around the world are driving oil prices up above$80 - putting pressure exactly where the old cap n trade scheme was supposed to. Ironic that lack of AGW is helping growth of alternatives. (someone up there loves us)

"But the fact remains that only a few EV's need to get to market. Then everyone will have a friend of a friend who has one."

Before '..a friend of a friend who has one' saturation, never forget that auto firms leased over 5,000 EVs in the 1990s before they took 90% of them back for crushing.

It's been said that auto/oil firms actually promoting an EV electric future is like a fuhrer becoming a rabbi.

EVs may have a niche as a second car. The price will be the barrier, no one wants to pay more for a car with less utility (range). Once the Nissan Leaf and others get out there, enough early adopters will spawn news stories about how wonderful they are. Wait and see, then we can all come back and comment on what happened and why.

Batteries are still too expensive.

A tired old assertion with no support whatsoever. Meanwhile, more and more hybrids continue to be successfully brought to market, with PHEVs and BEVs a year away from rolling off the production lines. My hybrid hits 10 yrs in 2010 and is still running strong.

Even in 2020, consumers will find this price of $8,000 to$10,000 to be a significant part of the vehicle’s overall cost. They will carefully evaluate the cost savings of driving an electric car versus an ICE-based car against the higher up-front cost. It will be a complex purchase decision involving an evaluation of operating costs, carbon benefits, and potential range limitations, as well as product features.

No no no. People do not 'carefully evaluate'. Whatever the neighbours have, they want to have too. Big SUV's and trucks? Where was the careful evaluation when most people didn't need them? It was (and still is I guess) a fad, that's why people want them. Most people buy them simply because they feel good driving around in them. Buying a car is for 90% an emotional and 10% a rational decision.

Look at the Prius, why was it a success? For emotional reasons, not because people carefully evaluated its cost compared to other vehicles. People simply wanted to be seen in a Prius because it was green and different. That can happen for EV's too. Or the opposite: people refusing to consider them, even if the TOC is half that of an ICE car.

Even in 2020, consumers will find this price of $8,000 to$10,000 to be a significant part of the vehicle’s overall cost. They will carefully evaluate the cost savings of driving an electric car versus an ICE-based car against the higher up-front cost. It will be a complex purchase decision involving an evaluation of operating costs, carbon benefits, and potential range limitations, as well as product features.

No no no. People do not 'carefully evaluate'. Whatever the neighbours have, they want to have too. Big SUV's and trucks? Where was the careful evaluation when most people didn't need them? It was (and still is I guess) a fad, that's why people want them. Most people buy them simply because they feel good driving around in them. Buying a car is for 90% an emotional and 10% a rational decision.

Look at the Prius, why was it a success? For emotional reasons, not because people carefully evaluated its cost compared to other vehicles. People simply wanted to be seen in a Prius because it was green and different. That can happen for EV's too. Or the opposite: people refusing to consider them, even if the TOC is half that of an ICE car.

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