Malcolm Flynn | Jul 16, 2012

Growing interest hybrid and pure-electric vehicles could see their costliest component, the battery pack, drop in price by more than 70 percent by 2025, a new study has found.

The study, by consulting firm McKinsey & Co, cited increasingly stringent emissions standards and the cost of oil as factors which will see an increase in demand for electrically-assisted vehicles.

This ‘increased volume leading to lower prices’ view follows basic economic theory, but the study also suggests that costs will fall through greater production efficiencies of the batteries themselves.

The study suggests that ongoing development by the broader consumer electronics industry will see the cost of lithium-ion batteries drop, with concurrent improvements in their energy efficiency.

“Over time, those improvements will work their way into vehicles”, McKinsey's John Newman said.

McKinsey estimates the current cost of EV and hybrid batteries at between AU$490-$590 per kWh, with the potential to fall to AU$155 per kWh by 2025.

The study estimates the current cost of batteries in the consumer electronics sector at AU$245, illustrating the current disparity between the two sectors.

"It's the consumer electronics industry as much as any other industry that's driving the costs lower," Newman said.

At these cost estimates, Holden’s upcoming Volt range-extended hybrid’s 16.5 kWh battery cell currently constitutes about $9000 of its $59,990 asking price, with the potential of such a battery pack to drop to about $2500 by 2025.

Such value improvements would also improve the mainstream competitiveness of future generations of vehicles like the Nissan Leaf ($51,500) and Mitsubishi i-MiEV ($48,800).