Mountain View, California – A recent analysis by Frost & Sullivan has found that skyrocketing oil prices, combined with concerns over tailpipe emissions, are increasing the demand of hybrid electric vehicles (HEV) and electric vehicles (EV), along with their batteries. The report said that the market in these batteries earned revenues of over US$710.9 million, with a growth rate of 31 per cent, in 2007.

“To reduce the dependency on oil, governments of various developed countries offer promotional initiatives and legislative regulations that provide tax credits and concessions to users of environmentally-friendly vehicles,” said Suba Arunkumar, Frost & Sullivan analyst. “Battery manufacturers have also stepped up efforts to roll out an impressive array of new technologies to deliver more efficient, high-performance batteries in the future.”

As these vehicles are predominantly battery-powered, batteries play a major role in pricing. The challenge for battery manufacturers is to provide the right battery chemistry that provides superior performance while maintaining cost efficiency. With an intense focus on research, high-performance and affordable batteries will soon be a reality, but the market is still in the growth phase and will take a few more years to achieve higher volumes. “The heavy expenditure involved in research has a spillover effect on the cost of these vehicles,” Arunkumar said. “While this can dampen uptake in this growth phase, prices are expected to decline with the rise in sales volumes.”

Further refinement of new technologies, such as lithium-ion batteries, will play a pivotal role to ensure future market expansion. The responsibility is for auto and battery manufacturers to strive to reduce costs, to enable these vehicles to become affordable realities.