Background: Interest in hybrid-electric vehicles (HEVs) has recently spiked, partly due to an increasingly negative view toward the U.S. foreign oil dependency and environmental concerns. Though HEVs are becoming more common, they have a significant price premium over gasoline-powered vehicles. One of the primary drivers of this “hybrid premium” is the cost of the vehicles’ batteries. This paper focuses on these batteries used in hybrid vehicles, examines the types of batteries used for transportation applications and addresses some of the technological, environmental and political drivers in battery development and the deployment of HEVs.Methods: This paper examines the claim, often voiced by HEV proponents, that by taking into account savings on gasoline and vehicle maintenance, hybrid cars are cheaper than traditional gasoline cars. This is done by a quantitative benefit-cost analysis, in addition to qualitative benefit-cost analysis from political, technological and environmental perspectives.

Results: The quantitative benefit-cost analysis shows that, taking account of all costs for the life of the vehicle, hybrid cars are in fact more expensive than gasoline-powered vehicles; however, after five years, HEVs will break even with gasoline cars.

Conclusions: Our results show that it is likely that after 5 years, using hybrid vehicles should be cheaper in effect and yield a positive net benefit to society. There are a number of externalities that could significantly impact the total social cost of the car. These externalities can be divided into four categories: environmental, industrial, R&D and political. Despite short-term implications and hurdles, increased HEV usage forecasts a generally favorable long- term net benefit to society. Most notably, increasing HEV usage could decrease greenhouse gas emissions, while also decreasing U.S. dependence on foreign oil.