2007 Toyota Camry Hybrid battery (© Jacob Gordon)Click to enlarge picture

2007 Toyota Camry Hybrid battery

A frequently voiced concern about hybrids centers around the high cost of replacement batteries, which have ranged up to about $3,000. Now some relief may be on the way. Toyota announced last month that it has reduced the price of replacement batteries for the current (2002-2009) Prius by $686, to $2,299. Batteries for the first-generation Prius dropped $397 to $2,588.

That still seems like a lot of money. But overall, we have found hybrids to be very reliable in our subscriber surveys and relatively inexpensive to own. Automakers are required to warranty batteries for 8 years and 80,000 miles nationwide or 10 years and 150,000 miles in states that follow California emissions regulations. Relatively few hybrids have exceeded that mileage yet.

Given the length of the battery warranty, even if a hybrid owner does have to replace the battery pack after 80,000 or 150,000 miles, the cost is comparable to the cost of a transmission, which would likely have failed in other cars before that point. And hybrids have fewer other issues, which more makes up for any added battery cost.

Toyota says it has been able reduce costs in part by building its own batteries through its joint venture with Panasonic, through Panasonic EV Battery Corp., thereby reducing the impact from the battery middleman. And the company says it expects battery price drops to continue.

The nickel-metal hydride batteries in the all of the current hybrid vehicles are also recyclable which may help with price reductions.

Cheaper batteries are good news for more than owners of hybrids today. Electric cars, and hybrids that plug in for extra power are the most promising near-term alternative to oil consumption. And those cars will require bigger and better batteries to meet consumer demands for performance and range.

The next generation of advanced batteries is called lithium-ion batteries, like the one we had installed in the plug-in Prius we are testing. Lithium Ion batteries are smaller and lighter for the same energy storage capacity and so lend themselves better to full electric and plug-in hybrid vehicles. However, they cost even more than nickel-metal hydride batteries. And expensive lithium-ion batteries are the biggest stumbling block to building more electric cars. So the race is on to lower the price of batteries across the board.

Toyota will start building lithium-ion batteries in 2009 and mass-producing them in 2010, the company says. But Toyota’s National Manager of Advance Technology Vehicles Bill Reinert says the company is already looking beyond lithium ion for future energy storage.

Dilithium crystals or a Flux Capacitor, anyone?

Learn more about alternative fuels in our guide to driving green. And read "Taking charge: Toyota Prius plug-in hybrid."