Reuters is reporting on a study by consulting firm McKinsey & Co which states that the cost of lithium-ion batteries used in current-generation EVs could fall by 70 percent or more by the year 2025.

Due to the fact that more automakers are rushing to build electric vehicles, in combination with rising oil and gasoline prices, means that the economies of scale for lithium-ion battery manufacturing should reduce prices in the coming years. According to the study this alone would account for one-third of the projected price drop, with the balance being contributed by an influx of new battery companies, borrowed technology from electronics companies such as Apple, and refined and standardized manufacturing equipment.

The current price of lithium-ion batteries is between $500 and $600 per kilowatt hour but prices are expected to fall to $200 in 2020 and to $160 by 2025. The U.S. Department of Energy has a goal to reduce the per kilowatt hour price to $300 by 2014.

“Cheaper batteries could enable the broader adoption of electrified vehicles, potentially disrupting the transportation, power and petroleum sectors,” the study stated.

The cost of the lithium-ion batteries in a new EV is the biggest hurdle to widespread adoption of the technology. For example, just the battery packs in the new Ford Focus Electric run between $12,000 and $15,000; that’s nearly the full selling price of the base-model gasoline-powered Focus. Because of the high battery prices, the Focus Electric has a sticker price of $39,995.

If gasoline prices continue to average $3.50 per gallon and battery prices do begin to fall within projected ranges, McKinsey & Co believes that auto manufacturers will be able to build EVs that can compete on cost with their fossil-fuel burning siblings.

[via Autoblog]

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