| 777 | Date: Saturday, 30 Oct 2010, 14.13 | Message # 1 |
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| Talk with any executive involved with hybrid- or pure-electric vehicles, and the conversation inevitably comes back to cost. The hope is that economies of scale will save the day, bringing down component costs and making green vehicles affordable and profitable for all. Except that prices might not fall.
Several recent studies indicate that the cost of batteries may not decline as much as hoped over the next decade. What's more, some researchers think the cost of rare-earth elements--essential to key components in an electric drivetrain--actually may increase.
Rare-earth elements and lithium for batteries are at the heart of the new technology. Far more than any consumer product, hybrid vehicles such as the Toyota Prius are the world's biggest users of rare-earth elements. And for electric vehicles--burdened by high battery costs--price reductions are essential to selling to mainstream buyers.
Yet a report from Roskill Consulting says demand for rare-earth elements will exceed supply within four years. That would make the elements known as lanthanides--crucial for the magnets installed in motor-generators--very pricey.
"It would suggest prices will gyrate upward, adding cost to any automaker building hybrids," said Robert Bryce, author of the book Power Hungry. "And that's assuming automakers can be assured of a reliable supply."
For example, the per-kilogram price of neodymium -- a crucial element sourced from China and used in high-end magnets -- has doubled in the past year, according to metal-pages.com.
"The mandated higher fuel economy standards mean the auto industry will have to embrace hybrids to meet standards," Bryce said. "The increased volume of hybrid production will increase the demand for rare-earth elements. We are trading one type of foreign dependence--on foreign oil--for another."
'Go big, go volume'
Although Toyota Motor Corp. has been the leader in hybrid vehicles, Renault-Nissan is placing the biggest bet on pure-electric vehicles.
Renault-Nissan CEO Carlos Ghosn is betting 4 billion euros ($4.92 billion) to create eight electric-vehicle models and 500,000 units of global capacity within the next few years. He may be the firmest believer that economies of scale will make EVs affordable and profitable.
"Go big, go volume, that's the big driver," said Simon Sproule, communications director for the Renault-Nissan alliance. "We're not going to claim profit from Day One, but we're not in the EV business to lose money."
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