The challenge for electric vehicles is how to make them affordable. Industry leaders at the Business of Plugging In conference in Detroit this week conveyed some ideas about how to put electric vehicles’ cost on par with conventional cars.

Why are they so expensive today? There are three main reasons:

• Car batteries are an emerging technology
• Automotive-grade electronic components need to be much more robust than those currently built for cell phones and other devices, therefore driving cost.
• No such parts are mass produced today, preventing economies of scale.

Many electric-car components today have to be custom made. One example cited by Tony Posawatz, the director of the Chevrolet Volt program, is the on-board charger. Posawatz says the charger cost GM two or three times what it could have, because no company mass-produces a large enough charger for the Volt’s 16-kwh battery pack--one capable of charging from both 110- and 220- volt outlets, lasting for 10 to 15 years in harsh environment including extreme hot and cold temperatures, and enduring constant vibration. Once production of the Volt and other electric cars ramps up, such chargers will become commodities (like cell-phone chargers today) and will therefore become less expensive.

But the charger is only one example. Procuring a steady supply of batteries is even more challenging. Currently, no company builds lithium batteries large enough to power a car in North America. So batteries, known as the heaviest part of an electric car, have to be transported from Korea. They have to come by ship, because they tend to get damaged by the high altitude and cold temperatures in cargo planes, which would have added even more cost anyway. Today, as automakers ramp up production, there is a lot of competition for the relatively few batteries large enough for electric cars. The Volt’s battery is said to make up about $16,000 of its estimated $40,000 price tag. That’s $1,000 per kilowatt hour. So reducing the price of the battery will be key to bringing down the price of the car. GM says its target is $250 per kwh, which would make the next generation Volt competitive with gas-powered cars.

Meanwhile, some electric-car experts at the Business of Plugging in conference observed that the Volt’s high $40,000 price may help it succeed at first. Only committed electric-car fans will buy them, and they may be more willing to endure some inconvenience as early adopters. Other business models that are being talked about are leasing programs for the batteries and a swapping program, much like turning your empty gas grill’s propane tank for a full one. Not worrying about the battery as an integral part of the car might make the transition to electric cars more palatable. Government subsidies, meant to encourage EV use are already in plan in Israel and Denmark.

—Eric Evarts

Edited 11/2/09