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Cheap electric cars will be driven by supply chain expansion

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A cheaper electric car will come as the result of high-volume manufacturing of lithium-ion batteries, not a new technology, according to a new report.

A cheaper electric car will come as the result of high-volume manufacturing of lithium-ion batteries, not a new technology, according to a new report.

Management consulting company PRTM on Monday said experts underestimate the projected demand of electric vehicles -- and those companies and nations that can ramp up production for batteries stand to profit as electric cars become cost competitive with gasoline-powered vehicles.

That's expected to happen in the next six to eight years across the globe, according to a PRTM representative quoted in a CNET report about the projection.

PRTM argues that plug-in vehicle volumes will ramp up significantly in 2016 in Europe and 2018 in the U.S. as costs approach gas-only cars.

The U.S. federal government last August announced a $2.4 billion investment in batteries that was matched by private companies.

The breakdown of those grants included:

  • $1.5 billion to U.S.-based manufacturers to produce batteries and their components and to expand battery recycling capacity.
  • $500 million to U.S.-based manufacturers to produce electric drive components for vehicles, including electric motors, power electronics, and other drive train components.
  • $400 million to buy, deploy and evaluate "thousands" of plug-in hybrid and all-electric vehicles for test demonstrations in several dozen locations, including the installation of electric charging infrastructure and education and workforce training to support a transition to advanced electric transportation systems.

Right now, lithium ion battery manufacturing is dominated by companies in Asia, particularly China.

A few more points from the PRTM forecast:

  • Technology advancements will not drastically affect prices until 2020.
  • Battery costs will go down by about half based on supply chain expansion.
  • Plug-in vehicles will represent about 10 percent of new cars sales.
  • The Nissan Leaf and Chevy Volt are still only attractive to early adopters and fleet operators.

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Andrew Nusca

Editor Emeritus

Andrew Nusca is editor of SmartPlanet and an associate editor for ZDNet. Previously, he worked at Money, Men's Vogue and Popular Mechanics magazines. He holds degrees from the Columbia University Graduate School of Journalism and New York University. He is based in New York but resides in Philadelphia. Follow him on Twitter. Disclosure