Last week A123 became the second major American battery manufacturer to file for bankruptcy this year, another casualty in a sector that a few years ago looked like a sure winner. Besides the emerging market for electric and hybrid vehicles, personal electronics like laptops and iPhones need batteries—and a third potentially huge market is energy storage for intermittent renewable sources like solar power. These three applications were together expected to help battery sales surge–especially the autos. Hybrid cars, either with a battery pack that assists an internal combustion engine (ICE), the “plug-in” variety like the Chevy Volt, or Nissan’s recent BEV entry (The Leaf) gave glimpses of a world where it would be possible to almost never use gasoline. Yet sales of hybrid and electric vehicles have not lived up to expectations. Here’s why: batteries are too expensive.
The 2013 Ford Fusion SE Hybrid has a MSRP $3500 higher than the same model with a conventional internal combustion engine, mostly because of the cost of the battery pack. The hybrid model has a fuel economy of 47 mph compared to 22 (city) and 34 (highway) for the gasoline-fed model. Making a few assumptions, the average American has a thirty mile round-trip commute (half highway) 250 days a year. They own their cars for about five years. Over the course of five years, the hybrid car will use approximately 550 less gallons of gasoline. Gas prices would have to top $6 a gallon for the hybrid owner to save money over the course of owning the vehicle. Most people will not pay more simply to own a “green” car—they want value they can put in the bank. However, Detroit automakers may soon be forced to incorporate more hybrids and fully electric vehicles just to meet rising fuel standards, not free market demand. The Corporate Average Fuel Economy (CAFE) that regulates the average fuel economy for a manufacturer’s fleet is on track to require fuel efficiency equal to 40 mpg in 2025. Chrysler, which traditionally has not produced hybrids because of costs, will introduce a hybrid 300 in 2013. CEO Sergio Marchionne admitted last year “I have no other way of getting to 2025 [CAFE] numbers than by going to hybrids.” Many different approaches are being pursued to lower the cost of batteries—the simplest in my opinion is changing battery electrode fabrication to water based processes that do not use expensive and toxic solvents.
–by Owen Crowther
