Steady Progress on Electric Car BatteriesNothing is more important for the long-term success of electric cars than a steady reduction in the cost of advanced batteries. It's like compound interest; for a while, these small incremental improvements don't seem like much, but after a number of years you've got double what you had before (or the same thing, but at half the price).
The good news is that in the past year, battery prices have dropped pretty significantly, according to Bloomberg:
The average price of lithium-ion battery packs for electric vehicles fell 14 percent in the past year as production capacity exceeded demand, Bloomberg New Energy Finance said.
Batteries cost $689 a kilowatt-hour in the first quarter of 2012, compared with $800 a year earlier, the London-based research company said today in a statement.
Prices for batteries have dropped 30 percent since 2009, making electric vehicles less expensive.
So while a 14% drop in one year seems a bit high and probably won't be sustained, just for fun, let's look at what this would do to the price of a $10,000 battery pack over a few years:
Year 1: $8,600
Year 2: $7,396
Year 3: $6,360
Year 4: $5,470
Year 5: $4,704
Year 6: $4,045
Year 7: $3,479
And so on... You can easily model what a 8% or 10% drop in prices would look like, but the main point is that compounding is pretty powerful, and if a high enough rate can be maintained, things start to move quickly after a few iterations.