Apr 232012

Plug-in Economics

The economics of developing plug-in vehicles has been a contentious issue for some time. The cell panels required to power electric vehicles are not only a difficult consideration in relation to the considerable space they take up and the added weight they bring to a vehicle, they are also hugely expensive. Hence the big difference in price between an electric car and a similar vehicle running on petrol or diesel.

Charging Electric Car - Expensive Battery Costs

Charging Electric Car - Expensive Battery Costs

Costly Battery Packs

Although it has been clear since the very birth of electric vehicles that the battery packs themselves were the most costly element to incorporate, sending up the retail price considerably, until now we haven’t been aware of just how expensive these are. Well, now the chief executive of Ford, Alan Mulally, has revealed just what we are dealing with in terms of plug-in economics.

Battery Costs a Third

Speaking at conference focused on green technology held in California, Mulally told attendees that batteries for the new plug-in version of the Ford Focus cost between $12,000 and $15,000 per unit. And that’s for a vehicle whose petrol equivalent retails for just $22,000, meaning the battery is by far the most costly piece of kit involved when engineering electric vehicles that are commercially viable. Indeed, Ford has stated that it will begin to sell the Ford Focus EV in the US for just under $40,000 per vehicle, which means the battery accounts for around one third of the total cost of production.

Battery Cost Target

That suggests that the battery for the Ford Focus EV costs between $520 and $650 per kilowatt hour. At the same time, the Department of Energy in the US has set a target of $300 per kilowatt hour for EV batteries by next year. This is therefore looking increasingly unrealistic, meaning that the main plug-in market in the world, America, is some way off its targets when it comes to lowering the price of batteries for vehicles. And this is despite the fact that the Department of Energy has helped to fund factories that construct batteries in the US.

Battery Developers a Niche

So why are batteries so expensive? In many ways it is a Catch-22 situation for the auto industry. Although many carmakers are able to save costs on building electric vehicles by basing them on existing models, the batteries are the one part of the vehicle that is different and it remains a niche market. That means you have battery developers who are spending huge amounts of money in research and development in a bid to lower charging times, the dimensions of the battery, and their weight.

Battery Developers need to sell in bulk

But they are still struggling to sell large numbers of batteries because the EV market remains so small. This is mainly because of the cost of electric vehicles. After all, how many more EVs would be sold if prices were roughly at the level of petrol or diesel vehicles? For the economics to work there has, therefore, to be a tipping point at which battery producers are selling enough to recoup costs. At the moment, dealing in electric cars remains an expensive exercise.

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