New York, New York – The worldwide manufacturing capacity for lithium-ion batteries for electric vehicles (EVs) will greatly exceed supply unless the demand by automakers increases significantly in the short term, according to industry analyst Bloomberg New Energy Finance.

Battery prices are poised to fall as a result of the overcapacity, the company said.

Automakers have committed to producing up to 839,000 plug-in EVs worldwide by 2013, up from just 124,000 that will be delivered by the end of 2011. As a result, demand for lithium-ion batteries will increase by sevenfold in those two years, but the supply capacity under construction by battery makers will be almost double the number of planned electric vehicles by 2013. As batteries have a limited shelf life, it is unlikely that battery manufacturers will produce more than market demand, and instead will reduce their output to match contracted demand.

Currently, EV batteries cost between US$800 and $1,000 per kWh and make up about 30 to 50 per cent of the cost of a typical EV. The short-term overcapacity and competitiveness in the field will push battery prices lower and improve the affordability of EVs, but will make life increasingly difficult for smaller battery manufacturers.

There are currently over 20 battery makers with plants constructed or under construction. Declining battery costs are expected to hit around $350 per kWh by 2020.

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