Pleasant surprise on hybrid costs

My undergraduates have been assigned a couple of auto industry cases in the capstone strategy class, so the past week I’ve been reading the textbook case on GM vs. Toyota.

Reading the case reminded me of the warning (as the case puts it):

The big drawback [of a hybrid] is that … the battery has to be replaced about every 100,000 miles at a cost of around $2,000.

This was written about four years ago, and when looking into it, the real world experience has been much better. Honda has a 0.2% replacement rate (although many of those cars are no where near 100,000 miles), while battery costs are declining.

This has obvious positive implications for the (even more battery dependent) true electric vehicles as well as plug-in hybrids (PHEVs). Of course, we are talking about different battery technologies as the Chevy Volt (among others) will lead the shift from the NiMH of the Prius to Lithium Ion now used in laptops and soon in automobiles.

If EV batteries have an improving cost-effectiveness curve comparable to laptops of the past 15 years, this solves one of the two main economic problems facing electric vehicles. The other is where we get another 3,000 GWh of electricity (presumably all distributed off peak).

Here is an opportunity where a blind faith in technological progress will apparently rewarded with solutions to a major cleantech business problem. I’ve been skeptical of such technological determinism for aspects of cleantech business, but it appears that for electric vehicles — like computers but unlike nuclear airplanes — market demand looks like it will solve key technology hurdles.