Why There's Hope for Electric Car Revolution by 2020

Ariel Schwartz sees electric cars and their batteries benefiting from 'tailwind provided other industries.'

Published: 12-Jul-2012

Anyone watching the electric vehicle industry’s progress over the past few years has probably been dismayed at the glacial adoption rate of EVs. It’s still rare to spot an EV on the road, even in major metropolitan areas. But take heart: even if we don’t reach some sort of gas price tipping point for EV adoption, research from McKinsey suggests that the price of lithium-ion batteries could plunge by 2020, creating a space for the EV market to flourish.

The report, released in McKinsey Quarterly, says that the price of a lithium-ion vehicle battery pack could plunge from $500 to $600 per kilowatt hour today to about $200 per kWh by 2020 and $160 per kWh by 2025 due to major technological advances. If gas prices in the U.S. stay at or above $3.50 per gallon, EVs could compete on total cost of ownership with gasoline-powered vehicles (with batteries at $250 per kWh).

A boost in battery innovation will likely come from the consumer technology industry, where lithium-ion batteries will continue to power more and more of the gadgets we use every day. "[The industry] will benefit from tailwinds provided by other industries," explains John Newman, an associate principal at McKinsey.

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The answer is it depends on the actual range the buyers expects to need, says Design News' Charles Murray.

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