Put the Battery Before the Electric Vehicle

Technology Review observed yesterday that there is a substantial gap between domestic electric vehicle battery production capacity and actual battery demand. The article notes that three years after the Obama administration distributed $2.4 billion in grants to electric vehicle battery manufacturers as part of the Stimulus, while the industry is expected to have a battery production capacity of 3,900 megawatt hours in 2013, expected demand next year will only amount to 330 megawatt hours. (The Nissan Leaf has a 24 kilowatt-hour battery; 3,900 megawatt hours is thus the equivalent of 162,500 Nissan Leaf batteries). The result? “The factories funded by those grants are sitting idle or operating well below their originally intended capacity.” This troubling development is further evidence that too many policymakers and electric vehicle advocates are putting the cart before the horse, or, more fittingly, the electric vehicle before the battery.

Increasing the nation’s battery manufacturing capability is meaningless so long as demand for electric vehicles remains low, and that demand will remain low so long as the nation manufacturers underperforming batteries. “The problem is simple,” according to the Technology Review article, “People aren’t buying enough electric cars, and most of those that are being sold contain batteries made by established battery makers in Asia.” But it’s no surprise that people aren’t buying electric cars, seeing as how far they fall below consumer expectations because of current battery technology limitations. As related in a previous ITIF blog post,

Reuters reported that Toyota “has scrapped plans for widespread sales of a new all-electric minicar, saying it had misread the market and the ability of still-emerging battery technology to meet consumer demands [emphasis added].” Toyota Vice Chairman Takeshi Uchiyamada acutely observes, “The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge.” In fact, while gas cars can travel more than 300 miles between refueling – a process which only takes a few minutes – battery electric vehicles in the market today tend to have a range of less than 100 miles per charge and depending on the charging technology available, can take anywhere from half an hour to twenty hours to fully charge. And there can be no doubt that batteries are to blame for electric vehicles’ high price tags. In a 2012 forum on green technology, Ford CEO Alan Mulally lamented that the battery alone made up $12,000 to $15,000 of the cost of its electric Ford Focus, while a gasoline-powered Focus sells for $22,000 in its entirety. “So, you can see why the economics are what they are,” he noted.

Thus, while the Obama administration grants emphasized manufacturing capability, emphasis needs to be placed instead on battery innovation. Battery cost and performance is at the heart of electric vehicles’ lack of competitiveness with conventional gas cars. Case in point: the Technology Review article notes that Asia has the edge in battery manufacturing – “the battery cells for the [plug-in hybrid Chevrolet] Volt so far come from Korea” – but “even there, [the factory is] still operating at only 20 to 30 percent of capacity.” Today’s batteries and the electric vehicles they empower simply aren’t viable for mass adoption.

The bottom line is that federal funds for battery manufacturing grants would have been much better spent on improving battery technology by “shoring up advanced battery R&D in government entities like ARAP-E’s Batteries for Electrical Energy Storage in Transportation (BEEST), the Vehicle Technologies Program within the Department of Energy’s Energy Efficiency and Renewable Energy Program, and the National Labs,” as ITIF previously pointed out in the case of the ineffective federal electric vehicle tax credit. Factories the world over will only manufacture batteries at full capacity when those batteries enable electric vehicles to genuinely compete with gas cars on both a cost and performance basis.