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Lithium-ion battery prices likely to plummet, but cost of electric cars may be slow to follow

If the leading industry experts are correct, prices for hybrid and electric vehicles should start to drop, but not nearly as much as you might expect.

According to the Wall Street Journal, the head of a major lithium-ion battery-maker revealed that his company plans to halve the cost of lithium-ion batteries for both hybrid and plug-in electric vehicles within the next six years at the 2013 Battery Show in Novi, Michigan, this month.

We have an internal target to go down by at least a factor of two by 2020,” said Prabhakar Patil, chief executive officer of LG Chem Power Inc., in the Wall Street Journal report. “I am very positive in terms of the slope that I see.”

Battery costs are among the major reasons for the differential in price between traditional automobiles and hybrid or electric vehicles. On the surface, Patel’s revelation sounds like great news for car buyers.

The problem?

The Journal reports that the cost of the electronics systems that control the batteries is not expected to fall because of a lack of standardization in the auto industry. In other words, while competing automakers may use the same types of lithium-ion batteries, they typically use different, customized systems to operate the batteries. These systems are expensive and time consuming to produce.

The real issue is the cost of the total system,” Brian Kessler, president of Power Solutions, a division of Johnson Controls Inc., said in the Journal.
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