Skepticism from an insider who stands to gain from hybrid and EV boom.

One of the world’s leading battery makers says the lithium ion batteries that will power tomorrow’s electric vehicles and hybrids are gradually improving, but that cost will continue to stunt the demand for the technology for some time. Steve Roell, CEO of Johnson Controls believes reaching economies of scale will be a big challenge. “The industry is a very immature market, it lacks scale and it lacks standards,” Roell told Reuters. “What we’re going to see over time is that we’ll see chemistry and cell format and even battery management systems to begin to form standards, but it’s going to take some time.”

JCI Battery Plant

Steve Roell

Roell still had a relatively optimistic projection for the early success of hybrid and electric vehicles, saying that they could make up as much as 12 to 15 percent of the domestic auto market by 2020.

Last August, the Department of Energy announced $2.4 billion in grants to accelerate the development of electric vehicles and the batteries that will power them. So far, $1 billion of that money has been awarded to companies like Johnson Controls, A123 and LG Chem, but that money has yet to pay real dividends. Johnson Controls received the biggest grant, $299 million to build a hybrid battery manufacturing facility in Michigan, scheduled to open next summer.

As optimism grows leading up to the releases of the Chevy Volt and Nissan Leaf plug-ins, battery cost remains an impediment to the widespread adoption of EVs. Sure, the all-electric Leaf will start at around $25,000—making it as affordable as some hybrids—but that’s because a $7,500 government subsidy aims at getting as many EVs on the road as soon as possible.

JCI Battery Plant

Planners from Johnson Controls map out a new battery facility in Holland Michigan.

What happens if the subsidy goes away? For the most popular hybrids, like the Toyota Prius, federal subsidies phased out in 2007. Hybrids, with smaller batteries and therefore a smaller incremental cost than EVs, have mostly outperformed the overall vehicle market. But hybrid sales remain below 2 percent of the new car market.

Roell said the cost of hybrid or electric vehicles must come down, or fuel prices would have to spike to areas seen two years ago, for the vehicles to become more popular.