Hybrid electric vehicles (HEVs) and electric vehicles (EVs) are part of the new breed of environmentally-friendly vehicles that accelerate the transition from complete dependency on oil-based fuels to advanced EV technology. Skyrocketing oil prices combined with concerns over tailpipe emissions increase the demand of HEV/EV vehicles and HEV/EV batteries.
New analysis from Frost & Sullivan, World Hybrid/Electric Vehicle Battery Markets, finds that the market earned revenues of over $710.9 million with a growth rate of 31 percent in 2007.
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As climate change is a dominant theme, a radical shift to new technologies such as EVs is needed. The steady progression toward zero emission, pollution-free vehicles will augment conservation strategies to mitigate the impact of global warming.
"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," says Frost & Sullivan Industry Analyst Suba Arunkumar. "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 HEV segment is more dynamic compared to the EV segment, as HEVs prove more cost efficient. While EVs are constrained by their heavy dependence on batteries, HEVs combine a conventional propulsion system with an on-board rechargeable energy storage system.
The challenge for battery manufacturers is to provide the right battery chemistry that delivers superior performance while maintaining cost efficiency. With an intense focus on research, high-performance and affordable batteries will soon be a reality. The market is still in the growth phase and will take a few more years to achieve higher volumes. For now, there is great possibility for battery replacements in the next five years. This results in the cyclic behavior in demand pattern, augmenting market growth.
"The heavy expenditure involved in research has a spillover effect on the cost of these vehicles," notes Arunkumar. "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 manufacturers and battery companies to strive to reduce costs to enable these vehicles of the future to become affordable realities.
HEVs are being adopted in the Asia Pacific region, with the maximum demand stemming from Japan, where they are utilized for a host of applications. EVs in the form of motorcycles, delivery vans, and other vehicles, are also increasingly used. The booming economies of China, South Korea, Taiwan, and Australia also significantly contribute to the growth of this market and spike demand for batteries.