U.S.-China pact on electric cars needs more spark

Last month, the United States and China agreed to work together to develop electric cars.

I called a top industry expert about the deal, signed by presidents Barack Obama and Hu Jintao, expecting to hear it was, indeed, the breakthrough trumpeted by both countries.

But no. "It's more flash than substance," says Jacob Grose, a senior analyst at Boston-based Lux Resources Inc.

It pledges co-operation on common standards for plugs and other components and test methods, joint technology demonstrations, a "roadmap" to guide future research, and public relations.

"In terms of what it will do for electric vehicles," Grose says, "not very much," because it fails to address major blocks to mass acceptance: high costs, lack of charging stations and safety concerns.

Cost is the big issue, Grose says in a recent report published by Lux.

His research uses four categories of electric vehicle:

Hybrids have both electric and internal combustion motors powering the wheels. They can't be plugged in. Their batteries – relatively cheap and safe nickel metal hydride – are charged by energy from braking.

Plug-in hybrids run for a while on pure lithium ion battery power, then gasoline motors extend their range.

"Light" plug-ins – using relatively small, five-kilowatt-hour battery packs – get up to 20 or 30 kilometres of all-electric distance. "Heavy" plug-ins, like the Chevy Volt, claim to go at least 60 kilometres on battery alone and for that reason come with bigger packs, about 16 kilowatt-hours.

All-electrics, like the Nissan Leaf, claiming ranges of 400 km or more, have no gasoline backup and need batteries that store upward of 30 kilowatt-hours of energy.

Since 1990, the price of lithium-ion batteries for cellphones and other consumer electronics has plummeted from nearly $1,200 per kilowatt-hour to $300, Grose notes. (All figures in U.S. dollars.)

But vehicle batteries won't drop as rapidly since many cost-cutting measures have already been incorporated into manufacturing and far more safety features are required.

Lithium ion for cars now costs about $720 for each kilowatt-hour. At best, the price will drop to below $450 during the next decade – still too expensive for most consumers even if oil hits what Grose considers the "high end" of $200 a barrel.

At that oil price, only hybrids and light plug-ins are likely to sell well and – at roughly six million vehicles a year – they'd still constitute less than eight per cent of the global total by 2020.

Bigger batteries reduce operating costs. Here are the costs to power various vehicles through a typical 80 km trip:

Mid-size standard vehicle: $6 (in gasoline).

Hybrid: $3.50 (gas).

Light plug-in: $2.90 (gas, hydro).

Heavy plug-in: $1.70 (gas, hydro).

Pure electric: $1.10 (hydro).

Yet those savings aren't enough, given the thousands of dollars each step up in battery power adds to the car's initial price.

"Given the high price points ... today, and the current prospects for battery cost reductions, it's fair to ask whether prices ... will drop enough in the foreseeable future to lead to adoption beyond a relatively wealthy group of environmental enthusiasts," Grose says.

"Despite all the money invested, governmental support offered, and hype generated ... high prices mean that widespread adoption remains a question mark."

Other analysts are far more bullish than Grose, and billionaire investor Warren Buffett recently predicted that by 2030, all cars would run on electricity.

Of course, Buffett owns 10 per cent of Chinese electric carmaker BYD Auto.

Grose predicts that even with oil at $200 a barrel, fewer than 300,000 all-electrics will move in 2020. A new Chinese regulation calls for enough batteries to be produced next year alone to power nearly 135,000 such cars.