That was the consultant's conclusion in its report on the lithium-ion battery packs that power electric vehicles. McKinsey estimated that lithium-ion battery pack costs may fall to about $160 per kilowatt hour in 2020, a big drop from the estimated costs of $600 today, once production rates increase and technology improves.
Better yet, McKinsey said that automakers that could source battery packs at $250 per kilowatt hour will likely be able to build EVs "competitively," or at least when it comes to measuring total cost of ownership when compared to conventional vehicles. McKinsey factored in a $3.50-a-gallon average fuel price, which is slightly more than gas is selling for now in the U.S. but less than where gas prices were at this spring.
Battery-pack pricing is extremely topical because they account for such a large portion of the manufacturing cost of an EV and price reductions are viewed as key to reaching President Obama's goal of having 1 million plug-in vehicles on U.S. roads by 2015.
Whether $250 or $160 or some other number turns out to be accurate, lots of people are making predictions about the cost of li-ion packs later this decade. Last month, Roland Berger Strategy Consultants analyst Wolfgang Bernhart told EV World that the cost of a typical plug-in hybrid-electric battery "in Japan and Korea for contracts with a 2015 delivery" is falling to about $250 per kilowatt hour. Tesla Motors' Elon Musk was recently quoted as saying that $200 per kWh would happen "soon" but some say that prices around $400 per kWh will still be here in 2020. In April, Bloomberg New Energy Finance said battery costs had dropped to $689 per kilowatt hour, down from $800 a year earlier.