Demand for Hybrid Batteries to Increase, Study Reveals

If the cost of lithium-ion batteries doesn’t decrease as projected, it could jeopardize the development of advanced hybrid-electric vehicles, such as plug-in hybrids, one market research analyst says.

Future applications of HEV technology will need the greater efficiency and longevity afforded by Li-on batteries, says Joe Iorillo of Freedonia Group Inc., an Ohio-based market research firm. But the cost is prohibitive when compared with nickel-metal-hydride applications.

Battery packs on most HEVs today comprise hundreds of individual NiMH cells, similar to D-cell batteries used in items such as flashlights. Today, one NiMH cell costs about $1, while a Li-ion unit cost just under $3, Iorillo says.

“Costs are really plummeting,” Iorillo tells Ward's. “If battery producers can establish economies of scale like they have for Li-ion batteries for cell phones and laptop computers, that will contribute greatly to bringing costs down.”

In 2000, one Li-ion cell cost $5-$6.

Meanwhile, a Freedonia study suggests the market for Li-ion batteries destined for U.S. HEVs will hit $70 million by 2011. And by 2016, that total should more than quadruple to just under $300 million, the study says.

Rising popularity of HEVs, such as the Toyota Prius, driving demand for more powerful batteries.

But first, Li-on battery technology must overcome significant hurdles, Iorillo warns.

“Some Li-ion batteries have been known to burst into flames,” he says, “and that concerns a lot of battery manufacturers for hybrid vehicles, because if that happened on that large of a scale it would be catastrophic.”

Says a spokesman for General Motors Corp., which made headlines at January’s Detroit auto show by unveiling the Chevy Volt plug-in hybrid concept car: “Cost is a huge issue, no doubt about it. Another thing is durability. Li-Ion batteries have to be appropriately addressed or (plug-in hybrid-electric vehicles) are not going to happen.”

Leading battery manufacturers currently are hard at work trying to overcome Li-Ion’s shortcomings, Iorillo says, listing such research leaders as A123 Systems, Cobasys LLC, and a partnership between automotive supplier Johnson Controls Inc. and Saft Advanced Power Solutions, which has a contract with GM to produce the Li-ion battery pack for the upcoming Saturn Vue PHEV.

Battery manufacturers are “trying to address the volatility and durability issue with Li-Ion batteries,” Iorillo says. “Plus, they don’t know how they’ll perform in crash tests.”

However, a Ford Motor Co. spokesman says there are a variety of unforeseen variables that may drive down costs, such as government funding; partnerships between automotive companies; and even financial backing from electric companies, which stand to make a profit from PHEVs.

“It could take many different roads; there are a lot of unknowns,” the Ford spokesman says. “Until you grasp how these factor come in, it can’t be definitive.”

While auto makers and their battery suppliers try to advance the technology, some industry observers say battery technology cannot be pushed any further. California-based engineer Steve Bloxham, who is developing a light-vehicle application of hydraulic hybrid technology, notes batteries operate on a narrow band of usable energy, unable to fully charge or discharge.

“Since the 1830s, batteries have been looked at closely by people with a lot of money,” Bloxham says. “Pretty much every stone has been turned, looking for different batteries. We’re at the limit.”

While Iorillo is not so pessimistic, he admits the battery research clock is ticking.

“The next few years will be the real test to see if once the novelty of hybrid technology wears off it’s still going to have that kind of growth going forward,” he says. “If gas prices continue to be at the $2.50-$3.00 range, it will support the demand for hybrids.”

As gasoline prices in the U.S. continue to rise, so do sales of HEVs, according to Ward's data.

In January 2004, total HEV sales in the U.S. amounted to a meager 4,291 units. In March of this year, that number hit 34,639.

To satisfy the demand for HEVs in the U.S., auto makers such as Ford and Toyota Motor Corp., both of which offer hybrids today and promise more in the future, say the supply of batteries for the vehicles is of utmost importance.

And while Li-ion research continues, the NiMH market remains strong. Freedonia forecasts sales of NiMH units will amount to nearly $925 million by 2016.

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