Will Advanced Batteries Ever Be a Real Business?

In advanced mobility circles, batteries are the killer app. Specifically, lithium-ion batteries, which promise to deliver the range and power necessary to make widespread electric-vehicle use a reality. Right now, gas-electric hybrid cars, such as the Prius, have nickel-metal hydride batteries in them. These batteries just aren’t going to cut it for the future, however.

But even if there are some breakthroughs with Li-ion, will there ever be a big enough market to make ramped-up electrification anything more than a niche game? The total size of the potential global battery business ranges from $2.3 billion to (optimistically) around $10 billion by 2020. General Motors (GMGMQ) has recently expanded its batter-research efforts and claims to have 1,000 engineers on the case. That means GM could be spending something like $100 million a year on engineering salaries alone. To chase a market that would barely keep a large automaker in business for six months.

I’m not saying we’re throwing money down a hole here. But we might very well be in the throes of a competitive frenzy, with the world’s carmakers scared that if they don’t spend the money now, they’ll be too far behind when the inevitable EV-era arrives. At that point—and I think it won’t arrive until 2050—the battery business will grow rapidly. But until then, then is a classic example of industry strategically wasting money in the short term to stay in business decades from now.