According to a recent report examining batteries for electric vehicles from Pike Research, as manufacturing efficiencies improve and access to lithium expands, the installed cost of Li-ion batteries will fall by more than one-third by the end of 2017. In terms of revenue, the market for Li-ion batteries for transportation will grow from $2.0 billion annually in 2011 to more than $14.6 billion by 2017, the market intelligence firm forecasts.
Government subsidies that gave the initial impetus to the electric vehicle market will continue to drive the market in the near term, according to Pike. However, significant reductions in battery cost are imperative for the industry to grow to the $14.6 billion and 28 million kWh market that Pike Research also forecasts by 2017.
The market for [automotive] Li-ion batteries will be driven primarily by plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs), which require much larger battery packs than hybrids. Battery chemistries that prioritize energy capacity over power density can satisfy both the PHEV and EV battery segments, enabling vendors to offer products to multiple vendors for multiple models. Reducing the installed price of EV batteries to $523 per kilowatt hour in 2017 will be a critical step towards making PEVs cost-competitive with petroleum-powered vehicles.—John Gartner
(In its 2009 forecast on EV batteries, Pike forecast that Li-ion prices would drop to $470 per kWh in 2015. Earlier post.)
EVs will continue to be a niche market in the global transportation industry throughout the forecast period of this report (2011-2017), Pike noted, projecting that vehicles that use electricity for propulsion will represent less than 1.4% of the global market in 2017. Nearly half of the demand is likely to come from Asia (led primarily by China) while Europe and the United States are likely to constitute 25% and 21% shares respectively.
Substantial challenges to growing the PEV market persist—on both the supply side and the demand side of the market. While most PEVs today have a range of between 40 and 100 miles, continued concerns over range and the availability of charging infrastructure, remain among the biggest impediments to the wider adoption of Li-ion batteries. On the supply side, challenges such as achieving higher energy density, better safety, and greater discharge/charge rates linger despite advances in battery technology. Although a number of Li-ion chemistries are available today, none of them can claim to be the ideal solution. There are tradeoffs that a manufacturer has to make in choosing a particular type of Li-ion battery over others.
Regardless of the direction of the EV market, the landscape of Li-ion battery suppliers is likely to consolidate to a small number of major players that lead the industry and a handful of much smaller niche companies. A limited number (likely four or fewer) of battery chemistries that provide the best mix of performance, reliability, and cost will win out, with others likely to be abandoned by mid-decade. It is probable that lithium iron phosphate will emerge as the battery chemistry of choice by the end of the forecast period because of its superiority in safety, which has been an issue with the other Li-ion chemistries.
China will likely supplant Japan as the leader in global Li-ion battery production by the turn of the decade, Pike suggests.
To boost the US Li-ion battery market, Pike suggests that the federal government needs to encourage the purchase of PEVs beyond early adopters by:
Encouraging and providing access to capital for wide-scale commercial deployment of EV charging infrastructure.
Extending consumer incentives beyond the current $7,500 for purchasing to further encourage customers who buy primarily on convenience and cost.
Providing incentives for stationary storage systems that would create additional first and second life markets for batteries.