EV sales stalled by expensive batteries

"The cost of the battery today is almost the same as the cost of the car," said Sarwant Singh, of the international business research and consulting firm Frost and Sullivan. That makes it hard for e-cars to compete with traditional internal combustion engine vehicles, which have much lower up-front costs, even if the fuelling costs are higher.

"When you buy a car today, do you pay for three years of fuel? You don't," Singh said.

Speaking in Toronto as part of an industry panel on the opportunities in the electric car market, Singh estimated that current costs for electric car batteries are roughly $500 to $600 per kilowatt hour of energy - roughly 10 times the cost of an internal combustion engine.

Magna E-Car Systems has opened a new hybrid and electric vehicle system development centre and battery and materials testing facility in Auburn Hills, Mich. About 200 employees will work at the 82,000-square-foot complex, said a news release announcing the recent grand opening. Magna E-Car Systems is a joint venture between auto parts manufacturing giant Magna International and the Stronach Trust, the entity representing Magna founder Frank Stronach and his family. Including the new centre, it now has four facilities in North America and three in Europe.

Dave Pascoe, vice-president of electric vehicle technology at Magna E-Car Systems, a subsidiary of auto parts giant Magna International, acknowledged interest in electric cars has waxed and waned in recent years largely due to the shortcomings of batteries relative to the internal combustion engine.

In the past, those included the limited lifetime of the batteries and electric vehicles, the limited range of the battery, which made electric cars unsuitable for long trips, and the high cost of the batteries.

"Certainly, life has gotten better... range has gotten better," Pascoe told an audience representing business people and non-profit organizations interested in the e-car market. "Cost has not really gotten better... we've got to get the costs down to make it all work."

Singh estimated that in order to reduce battery costs 50 to 70 per cent, electric car production would have to reach roughly 100,000 units.

The third panelist at the event, Joe Cargnelli, chief technology officer for fuel cell technology company Hydrogenics Corp., noted that Toyota initially sold the Prius hybrid-electric car at a loss in order to boost volumes.

But Pascoe doesn't think higher volumes alone will be enough to sustain the market in the case of fully electric vehicles.

"Volume helps," he said, "but there still is a need for new technology in the battery area in order to bring the cost down.... Once we have a new battery technology that gets the cost down, I think then everything can go forward from there."

The vast majority of vehicles purchased by consumers are at the low end of the price range for all vehicles, he said. Magna E-car estimates that even for hybrid electric vehicles to reach a "tipping point" of mass appeal would require gas prices to hit $5 US a gallon or around $1.36 per litre Canadian, and gas prices would have to be far higher to make an electric vehicle seem worthwhile.

However, Singh said there are new business models that could make electric cars more appealing to consumers.

He suggested there are opportunities for "integrators" - companies that offer services to support electric cars, such as charging stations, battery recycling, and technology that allows utilities to balance the electric load at different times, depending on the demand from activities such as electric car charging. Companies based on that model, such as Palo Alto, Calif.-based Better Place, already exist.

Such integrators could price cars as part of a larger package, Singh said, citing electronics giant Best Buy. The company has proposed offering electric cars at its soon-to-launch UK superstores for free, with a catch - customers would have to pay 300 euros a month to access an "energy package" that provides services such as charging.

"The important thing to understand with electric vehicles," Singh said, "is the obvious opportunity's not making cars."

The panel was organized by MaRS, an Ontario public-private partnership aimed at boosting innovation and technology and supporting startups in the province.