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In Detroit, DOE Secretary Chu Predicts EV Battery Prices Will Do a Nose-Dive
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January 11, 2012

In Detroit, DOE Secretary Chu Predicts EV Battery Prices Will Do a Nose-Dive

By Cheryl Kaften
TMCnet Contributor

Electric and hybrid cars will become a driving force in the U.S. automotive industry by 2020, as a result of “plummeting” battery prices, U.S. Energy Secretary Steven Chu said on January 11—adding that American automakers have a “good shot” at hitting President Barack Obama’s target of one million plug-in vehicles on the road by 2015.

Chu was a featured speaker at a Detroit Economic Club event held on the floor of the 2012 North American International Auto Show, which he toured, along with three other Obama Administration Cabinet members—U.S. Department of Commerce Secretary John Bryson, EPA Administrator Lisa Jackson, U.S. Department of Transportation Secretary Ray LaHood.

Making his appearance during the press preview— three days before the show opens to the public, January 14-22—Chu reportedly stopped to look at the 2013 Chevrolet Malibu Eco, a mid-size hybrid, and the 2013 Chevy Spark minicar at the General Motors display.

“Whether it is 2015 or 2016 or whenever, I don't know,” Chu said. “I think it is possible. It depends on a lot of things. The price of batteries is plummeting. Three or four years ago, the cost of manufacturing a battery was $1,000-$1,200 a kilowatt hour. It's now about $600 a kilowatt hour. It's going to come down and everyone knows this.”

The DOE Secretary commented that the Obama administration is not deterred by soft sales of plug-ins during their first full year in showrooms, nor is it worried about the potential for overcapacity in battery production. Speaking of the initial production of the mostly electric Chevrolet Volt by General Motors (News - Alert) and of the fully electric Leaf by Nissan, Chu told Reuters, "If you look at what they've done, they've done it wisely," although the two automakers sold fewer than 20,000 of those vehicles combined in 2011.

According to Reuters (News - Alert), the Obama Administration has spent more than $2 billion to underwrite domestic battery production, and billions more to finance electric car development to cut U.S. oil imports and reduce pollution. Government and industry officials say bringing down battery costs is critical to meeting those goals, and Chu cited aggressive steps and measurable progress.

The goal, he added, is to halve the cost by 2020."Once you get a battery that's $1,500 and much less expensive than electric motors, which we are also working on, then you get to a very exciting price point," he said.

Following the speech, Henry Payne of the National Review Online commented, “Chu … defied the very industry experts he had visited during the auto show. A survey of 200 executives by [McLean, Virginia-based] KPMG Consulting on the eve of the show found that the costs of EVs [and hybrids] would prevent them from gaining more than a small percentage of vehicle sales by 2025. Indeed, 2011 saw a continued decline in hybrid-vehicle sales as a percentage of the market, despite a record number of offerings.”

However, Chu was not discomfited by any disparagement of his message. He commented that he thinks automakers will be forced to adopt next-generation technologies as new fuel-efficiency mandates become effective. “[These standards)] will drive American innovation,” asserted Chu.

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Cheryl Kaften is an accomplished communicator who has written for consumer and corporate audiences. She has worked extensively for MasterCard (News - Alert) Worldwide, Philip Morris USA (Altria), and KPMG, and has consulted for Estee Lauder and the Philadelphia Inquirer Newspapers. To read more of her articles, please visit her columnist page.

Edited by Rich Steeves

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