Cost of Electric Car Batteries May Drop 70 Percent by 2025

The cost of lithium-ion battery packs used in electric cars are expected to decline as much as 70 percent by year 2025, according to a recent study conducted by the McKinsey & Co.

The company predicts that the prices of the lithium-ion batteries, which are currently available in the range of $500 and $600 per kilowatt hour, will fall to as low as $200 in 2020 and to $160 by 2025.

These figures represent the price per effective kWh, assuming batteries with 70% depth of discharge (DoD), and include the price of battery cells, battery-management systems, and packaging.

The price of battery components is also expected to drop, which will make the batteries themselves cheaper. This tendency will increase as more batteries are produced.

If gasoline prices hover around $3.50 per gallon or higher, automakers that purchase batteries at $250 per kilowatt hour could offer electric cars that can compete with cars and trucks powered by advanced internal-combustion engines, which are now significantly cheaper.

Battery costs represent one of the main hurdles to the widespread adoption of electric cars, analysts say. The U.S. Department of Energy has set a goal to reduce the cost of a battery pack to $300 per kilowatt hour by 2014.