Why do electric cars cost so much? It’s pretty simple: It’s the batteries, a scaled-up version of what’s in your laptop. The car itself isn’t too different from everything else on the road, though maybe a bit lighter. The electric motors and control electronics aren’t hugely expensive. But those battery packs—$10,000 would be cheap even for a small unit, and the big 85-kilowatt-hour pack in the top-of-the-line Tesla Model S will probably cost the company $30,000 to $40,000, or even more. There’s a reason you pay $20,000 more for 300 miles of range in that version of the car.



But are we on the verge of a big breakthrough, not only in battery cost but in energy density? Probably. And the EV business, moving forward but off to a slow start, needs exactly that kind of progress to take off. Just be patient a bit longer, says Atul Kapadia, the chairman and CEO of Envia Systems, a battery maker with impressive credentials that include a General Motors investment and an ongoing partnership with the automakers’ advanced battery consortium.



Envia’s battery labs. Is this company close to changing the EV rules? (photo via GM)

The company got $4 million from the Energy Department’s ARPA-E advanced technology program in 2009, and Energy Secretary Steven Chu seems high on the company in this 2011 video. He says the company’s batteries (which license some technology from the federal Argonne Laboratories) are going into the successor vehicles to the Chevy Volt:



Kapadia told me that Envia has figured out how “to improve energy density at the anode and cathode and store more lithium.” In short, he claims to have doubled energy density and halved the cost of lithium-ion batteries. And he says that his breakthrough isn’t theoretical—packs are already built on an automotive scale and are being tested by automakers around the world.



It’s impossible to verify all that, and Kapadia won’t tell me which automakers he’s working with, though GM is presumably one of them. Specifically, Envia says it has reached an energy density of 400-watt-hours per kilogram in auto-grade lithium-ion cells, and achieved a price target of $150 per kilowatt hour.



That’s a bigger drop than most current estimates. David Vieau, CEO of major Massachusetts-based auto supplier A123 Systems thinks battery costs “will come down by a factor of two, if not more, in the next five years.” And Alex Molinaroli, president of Johnson Controls’ battery unit, also sees a 50 percent drop in five years.



Jon Lauckner, who heads GM Ventures and was just kicked upstairs to be the company’s vice chairman (replacing Bob Lutz), said this when pledging $7 million to the company last year. “Skeptics have suggested it would probably be many years before lithium-ion batteries with significantly lower cost and higher capability are available, potentially limiting sales of electric vehicles for the foreseeable future. In fact, our announcement today demonstrates that major improvements are already on the horizon.”



Envia’s battery cells claim to have achieved energy density of 400 watt-hours per kilogram. That’s off the charts, if true. (Envia Systems photo)

Kapadia says his biggest problem is that automakers are too slow. “Automotive qualification cycles are long,” he told me. Envia’s components have been in that cycle for two years, “and could be in an automobile in two years.” And then EVs will be ready for world domination, he says. “Envia’s founding mission was to have eight to ten percent of automobiles on the road electric driven by 2018,” Kapadia told me. “And by the time Gen X retires battery vs. gasoline could be a dealership option. Four hundred watt-hours per kilogram energy density is a giant step in that direction.”



I know, I know, the numbers are going over your head. What does it all mean? For that, I called Ted Miller, who’s a member of Ford’s management committee and the company’s lead guy for the U.S. Advanced Battery Consortium (USABC). He told me that, despite intense research into battery tech over the last five years (following 90 years of slumber), automakers are still paying something like $500 to $600 per kilowatt hour, so that means Envia would be cutting prices to less than a third of where they are now. Envia says it’s closing in on prices that are close to USABC’s long-term goal of $100 per kilowatt hour.



That’s a big achievement! It would mean a 24-kilowatt-hour pack (as used in the Nissan Leaf) would cost just $3,600. It’s reportedly $15,600 now, which makes it mighty hard for the Leaf to be a profitable car (even with $7,500 federal tax credits to ease consumers’ pain). If Envia and other companies can double energy density, then that pack would be much smaller and lighter than the boat anchors EVs are hauling around now. In the same space, the Leaf could have a 48-kilowatt-hour pack and probably 200 miles of range. OK, does it make a bit more sense now?



According to Miller, Envia is under contract with USABC and has demonstrated a cathode material (incorporating affordable manganese) “that operates at higher voltage, with higher energy capacity” than conventional cells. The cells need testing to prove they can last through thousands of recharge cycles, and store at various temperatures without losing their juice. Miller wasn’t aware that Envia is close to commercialization, but he says that USABC’s goal is to push new technology into the market, and if Envia is nearly ready, so much the better.



How does Wal-Mart manage to offer those crazy prices? Volume. And that’s key with batteries, too. Miller told me that (even absent Envia’s breakthroughs) USABC sees prices dropping to $250 to $300 a kilowatt-hour—less than half of what they are now—once companies start making 25,000 packs a year. Right now, EVs are still built in small numbers. The old joke (told most often about hydrogen fuel cells, but it’s still relevant to batteries) is that they’re “hand-built by Ph.Ds.” Would you want a Ph.D. to fix your plumbing?



But those volume goals are in sight. Tesla, for instance, wants to sell 30,000 Model S cars annually, a tall order admittedly for a luxury car. But we should routinely see numbers that high as automakers begin to electrify entry-level models.



The Tesla Model S could get a huge price break with reduced battery costs. (Tesla photo)

Most of the headlines now are about pokey electric car sales and the Volt’s woes. Yes, I know that GM is shutting down the factory for five weeks because of slow orders, but that doesn’t mean the sky is falling, as Charles Lane of the Washington Post believes. I think there’s a good chance that will soon be yesterday’s story.

