Hybrid and electric vehicles are set to become considerably cheaper in the coming years with the price of automotive lithium-ion batteries tipped to drop two-thirds by 2020.
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US-based business analyst McKinsey believes the price of lithium-ion batteries will fall from their current level of US$500-US$600 ($474-$568) per kilowatt hour (kWh) to US$200 ($189) per kWh by 2020, before dipping even further to approximately US$160 ($152) per kWh by 2025.

According to McKinsey’s data, the 24kWh lithium-ion battery pack in the Nissan Leaf currently costs up to $13,632. By 2020, the price is tipped to drop to as low as $4544, while by 2025 the same battery could cost as little as $3648 (not accounting for inflation).

Likewise, the 16.5kWh battery in the upcoming Holden Volt costs as much as $9372 today, but should fall to $3124 by 2020 and $2508 by 2025.

McKinsey’s report says almost 30 per cent of the savings will be achieved through improved economies of scale as battery demand increases, as well as through standardised manufacturing equipment and streamlined production processes. It says majority of these savings can be achieved within the next three years.

Lower component prices are set to account for roughly one-quarter of the savings between now and 2020, and advancements in anode, cathode and electrolyte technology are expected to account for the remaining 45 per cent of the savings, while also potentially doubling the batteries’ capacity leading to extended driving ranges.