EV battery pack prices fall; will consumers benefit?

Overcapacity is reducing the price of EV battery packs... but will automakers pass on the savings?

The single most expensive component involved in the production of electric and hybrid cars has gotten less expensive, according to Bloomberg New Energy Finance.

The British research company said yesterday that the average price of a lithium ion battery pack dropped 14 percent last year thanks an increase in global production capacity. During the first quarter of 2012, batteries ran at a rate of $689 per kilowatt hour, compared to $800 per kilowatt hour during the same period last year.

"A sharp decline in price may be unwelcome for battery manufacturers, but it is essential for the long-term health of the sector," said New Energy Finance CEO Michael Liebreich in a statement released to members of the media.

EVs require a minimum of 16 kilowatt hours of battery storage. Overall, batteries account for about a quarter of an EV's sticker price. Presumably, automakers will pass on much of the savings to consumers over the long run in an effort to boost demand, although it is unclear whether current EVs like the Nissan Leaf and Mitsubishi MiEV will see their list prices decline.

Currently, the industry has a surplus of around 10 gigawatt hours, or enough battery packs to build 400,000 EVs. By the end of next year, New Energy says that surplus might nearly double to 17 gigawatt hours, which would again significantly reduce the price automakers pay for battery packs.