Car Batteries: Plugging into a $25 Billion Market

What impact will the development and cost of various types of batteries have on the emerging market for electric cars? How much progress can we hope to see in the next decade, and what critical barriers will need to be overcome along the way?

The automotive industry’s quest to limit its impact on the environment and transform automotive mobility into a sustainable mode of transportation continues at high intensity, despite the current economic crisis. In an earlier report, we analyzed the technical and cost tradeoffs of competing alternative power-train technologies. ¹ 1 See The Comeback of the Electric Car? How Real, How Soon, and What Must Happen Next, BCG Focus, January 2009. Notes: 1 See The Comeback of the Electric Car? How Real, How Soon, and What Must Happen Next, BCG Focus, January 2009. In this companion piece, we address the two principal variables in our analysis of the developing market for electric cars: the technical attributes and the costs of lithium-ion batteries for electric-vehicle applications.

In assessing these variables, we drew on The Boston Consulting Group’s extensive work with automotive OEMs and suppliers around the world and on a detailed analysis of the relevant intellectual-property landscape. We also created a battery cost model that allows us to project future costs. In addition, we 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.

In this report, we explore 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? And how are industry participants likely to align themselves as they jockey for position in the evolving market?

Acknowledgments

The authors would like to acknowledge the substantive contributions of their colleagues on the project team: Clemens Hiraoka, Munehiro Hosonuma, Jonathan Nipper, and Annika Weckerle.