Progress could continue beyond that, toward the White House's implied 2030 goal of about $100 per kWh. But after the $300 mark, only new technologies -- developing now at universities and startups -- can take the baton from lithium-ion.
For companies such as A123, the issue isn't whether costs will fall, but whether they'll be the ones to do it. And plenty of investors are hoping they will.
After the GM snub in winter 2009, A123 redoubled its efforts. By August, it had secured the $249 million grant from DOE. This became kindling for its initial public offering in September, which raised $380 million and blasted its stock skyward by 50 percent.
The IPO entered venture-capital lore, a beacon for clean-tech entrepreneurs everywhere. A Reuters columnist called it a "smash-hit."
Fifteen months later, the mood has dulled. As A123 hustles to ready its Michigan factories for production, it has struggled to land a large production contract with a major automaker.
This is the paradox facing American companies. To complete globally, they have to get down the cost curve to where their Asian rivals sit. To get down the cost curve, they need buyers to place large orders of batteries. But no one knows how many buyers will materialize. No one knows if the market will erupt like the iPhone, or wind up a curiosity like the Segway.
A123 has a steep hill to climb
Investors give A123 a longer leash than some public companies, because of the company's technology and reputation, and the knowledge that its promised growth market, electric cars, needs time to develop. But it's a trying exercise. Such companies often, even typically, report negative revenue for years, all the while dispensing cash to build capital assets for the business they don't yet have.
Analysts such as Matthew Crews, a research analyst for Noble Financial who watches A123, aren't demanding steep profits right now. But they do want to see it lining up contracts -- if not with GM, then with any of the major companies planning to roll out electric-drive cars in the next four years.
"We're looking for demand, because obviously all of our financial models are based on demand that doesn't exist today," he said. "So it's based on expectations of the future."
Crews said for A123 to look viable, it needs to hit about $100 million in quarterly revenue in the next few years. In the third quarter of last year, A123 had $26.2 million of revenue. "I think 2012 is a validating year," Crews said, noting that BMW, Mercedes and Ford will have released electric-drive models by then.
Jason Forcier, vice president of A123's Automotive Solutions Group, said it has plenty of contracts -- they just tend to be in other countries right now. A123 is supplying SAIC, China's largest carmaker, with batteries for three different electric-drive cars. In Europe, it's supplying Daimler and BMW with batteries for electric buses and trucks.
"In nearly every case, we're competing against the top 10 battery makers across the globe, which includes the Koreans and the Japanese," he said. "From a cost perspective, there's no freebies out there."
Those are the birds in hand. In the bush, Forcier said, A123 is talking to multiple automakers in China, and in America, it expects to close a large production order with a major car company in 2011.
Theodore O'Neill, an alternative-energy analyst at investment bank Wunderlich Securities, is unconvinced. He said a "giant train wreck" awaits A123 in the next five years.
In 2009, the government was in charge of Chrysler and GM and in a perfect position to push mass production of electric cars. The volume would get American companies' costs down and get them into the game with Asia. "But it's not playing out that way at all," O'Neill said.
China pushes the ball down the field
The Volt will debut in the several thousands; the next year, annual production ramps up to a couple ten thousand. "It's just tiny, tiny numbers that just aren't nearly enough to get A123 or anyone else profitable," he said. "Meanwhile, in China, they're really pushing that ball down the field by aggressively building electric vehicles over there."