Frost: Volatile Gas Prices, Environmental Concerns Drive Hybrid Electric, Electric Vehicles
October 23, 2007 // Published as a news service by IHS
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With soaring gas prices and increasing concerns about global warming, developed countries are turning to alternative, environmentally friendly technologies to reduce dependency on oil and conventional fuels.
According to Frost & Sullivan, this move drives demand for hybrid electric vehicles and electric vehicles (HEV/EV) and is highly conducive for growth opportunities for the HEV/EV batteries market.
Recent analysis from Frost & Sullivan of the HEV/EV battery markets estimates 2007 revenues to reach $608.5 million, growing at a rate of 14.8% compounded annually.
"In order to reduce dependency on oil and conventional fuels, governments will launch many regulations and promotional initiatives that provide various tax credits and concessions to those using zero emission, environmental friendly vehicles," said Frost & Sullivan research analyst Suba Swaminathan.
Owing to such government endorsements and tax benefits, analysts said the battery market attracts increased investments in new technological developments and innovations that aim to improve the performance and efficiency of batteries.
The market faces challenges due to the lack of an ideal battery chemistry that could offer desirable performance at an affordable price. Analysts said batteries are highly priced and being the chief source of power in a vehicle, their high costs invariably affect the price of the vehicle.
This factor decreases the affordability of vehicles and significantly diminishes market growth, placing enormous strain on the profitability of manufacturers and posing a serious challenge to some market participants.
Analysts said this impact will likely taper off in the next two to three years as affordable, high-performing batteries hit the market as a result of ongoing, intense research efforts. The entry of more market participants should counter this challenge.
"Presently, the HEV/EV battery market is in its initial stage and witnesses steady growth patterns, resulting in the replacement of batteries in the next five years," said Swaminathan. "This cyclic trend in demand boosts market growth."
Source: Frost & Sullivan.