As lithium-ion (Li-ion) battery technology continues to improve, battery cell manufacturers have built new factories that incorporate advanced production techniques, and automakers have greatly increased their research and development (R&D) efforts on plug-in electric vehicles (EVs). According to a new report from Pike Research, a part of Navigant’s Energy Practice, these developments will translate into strong growth for Li-ion batteries over the remainder of the decade.

The overall market for Li-ion batteries in light-duty vehicles will grow from $1.6 billion in 2012 to almost $22 billion in 2020, the study concluded.

“The Li-ion battery looks set to be the chemistry of choice for the on-board energy storage market for the foreseeable future, taking over from nickel-metal hydride, which has been the preferred battery for hybrids to date,” said David Alexander, senior research analyst. “Li-ion batteries can supply the much greater capacity needed for battery electric and plug-in hybrid vehicles, and 2012 saw the launch and announcement of new models from many manufacturers, all featuring Li-ion batteries.”

The pressure to reduce the cost of electric vehicles is high, and the cost of the battery pack is the most important factor in determining the premium cost of EVs. Large R&D funds have been invested, but only small incremental improvements have been achieved so far. One challenge is that volumes remain small in automotive terms. The cost of the battery pack will come down to about $447 per kilowatt-hour by the year 2020 at scaled production, according to the report.

The report, “Electric Vehicle Batteries”, provides a detailed examination of the growing market for lithium ion batteries, including profiles of leading Li-ion battery manufacturers. An Executive Summary of the report is available for free download on the Pike Research website.