By Ehren Goossens, Bloomberg News

NEW YORK (March 26, 2015) — A new generation of hybrid cars that combine electric and gas power in new ways are emerging as a low-cost alternative for auto makers and consumers as batteries get cheaper and more efficient.

Battery packs for electric vehicles, loaded with lithium ion cells, now cost around $496 a kilowatt-hour, a 60 percent drop from 2010. That could plunge to $175 within five years, according to Sam Jaffe, an industry analyst with Navigant Consulting Inc.

So-called microhybrid systems featuring small battery-fed components that switch engines off and on at stoplights have been available for several years.

Adding technology that stores energy created when you stomp on the brakes will help make the stop-start systems more efficient, doubling fuel savings to about 15 percent, according to Johnson Controls Inc., a parts maker developing the new technology.

“Auto makers want to squeeze as much efficiency as possible out of the internal combustion engine,” said MaryAnn Wright, a vice president at Johnson Controls, which makes both lithium ion and lead-acid batteries. “These technologies bolted together will cost a fraction of electric vehicles.”

In January, Johnson Controls and Toshiba Corp. unveiled a shoebox-sized system at the North American International Auto Show in Detroit that throws a charge into the battery each time the brakes are hit. Production is expected to begin in 2018.

The new systems are emerging just as the auto industry faces a U.S. goal of 54.5 miles per gallon on average by 2025. Along with Johnson Controls and Toshiba, their development promises to benefit battery makers that include A123 Systems, BYD Co. and Panasonic Corp.

Fuel savings

While traditional hybrids run on electricity until they reach higher speeds, the larger battery packs needed to do this add both weight and cost. The use of smaller electric components in microhybrids offer similar fuel savings in a lighter, less expensive package, according to Wright.

“While it may not be as sexy, it's going to deliver,” Ms. Wright said. Early start-stop technology has already been adopted by car makers including General Motors Co. and Ford Motor Co.

Cheaper batteries are making the systems more efficient, with systems that turn engines off and on more frequently. Higher-volume manufacturing, increased storage capacity and rising sales are all helping bring down battery prices, Morgan Stanley said in a report in July.

Tesla Motors Inc. is a driving force in this trend with plans for a $5 billion battery “gigafactory” that may push costs below $100 a kilowatt-hour within 10 years.

Next steps

That's closing in on the threshold needed to make plug-in vehicles competitive without subsidies, said Jason Black, energy and environment leader at Battelle Memorial Institute, a research group in Columbus, Ohio.

“You would have to get down to the $100 range to see widespread deployment,” said Black, who was previously a systems engineer at General Electric Co.

The next significant step for microhybrid systems will include improved regenerative braking systems and using batteries to power more functions, such as air conditioning.

About one out of every six cars built worldwide will combine electric and combustion engines by 2025, Robert Bosch GmbH, the world's biggest car-parts maker, said last month.

Panasonic expects manufacturing volumes and demand to rapidly pick up for its batteries, starting in about 2018. The Japanese electronics company makes the batteries used in Tesla's Model S and is a partner on the gigafactory under construction near Reno, Nevada.

“We have been shifting to batteries for cars and industrial use because they can produce more added values and are less affected by price drops,” Panasonic said in a statement from its headquarters in Osaka.

This Bloomberg News report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.