Why do hybrids cost more than conventional cars?  There are many answer to this complex question, but much of the additional costs can be associated directly to the advanced battery systems and charging systems that power the and replenish the vehicles.

For example, GM states that it is currently paying up to three times more than it would like to for the Volt's charging system.  Why?  Lack of suppliers and lack of competition.  With few suppliers, the companies are likely to charge higher amounts than usual because they face no direct competition.  If GM is unhappy with the price, they have no where else to turn.

In order to reduce battery and charger costs, several things must first occur.  Manufacturers must be in abundance.  Products must be made locally to save significantly on shipping costs, and systems have to be engineered correctly rather than over-engineered as most hybrids are though to be today.

How much could costs drop?  In the short term, analysts think that by following the methods above cost per vehicle could drop a few thousand dollars.  A few thousand dollars could make hybrid and electric vehicles profitable to companies producing them. 

However, there are still additional hurdles to overcome.  Battery technology and materials are expensive.  Costs are not expected to not drop significantly according to analysts.  Most cost cutting measures will include reducing shipping cost of batteries by producing them within this country, but the U.S. is already behind in battery technology and must now catch up to countries such as China and South Korea.

Costs of producing EVs and hybrids will continue to drop.  But the drop will be gradual and it may take decade before we see significant reduction in costs.  According to the  Department of Energy, battery costs as a whole could drop to as low as $250 per kWh compared to $1000 per kWh today.  But no timeframe is given for the price drop and many think it could be 20 years away before a number like that is reached.

For now, companies will have to settle for a loss on most low cost EVs and hybrids they sell.  Government incentives help out, but must of these vehicles from large producers will not even break even.  Battery costs will be the deciding factor for EVs and hybrids and will determine their commercial feasibility and possibility of being a money maker for the car companies.

Source:  Wards Auto