Lithium Battery Over Capacity Debate Rages

July 27, 2010

Lithium Energy Japan, a Mitsubishi joint venture, decided in April to build a new lithium-ion battery factory in Japan. The plant is to supply 50,000 cars.

Several months earlier, A123 Systems said it would use a $249 million government grant to expand its manufacturing capacity. The company calculated its total could supply 320,000 hybrid cars. Then in May, it decided to add another 200 megawatt hours of production, bringing its total to 760 megawatt hours – a 350 percent increase since the end of 2009.

Early this year, EnerDel of Indianapolis unveiled its own plan to more than double U.S. production. The cost: $237 million.

Makers of lithium ion batteries are rapidly expanding their factories in anticipation of a ballooning market for electric cars. The trouble is none of them can be sure what the demand will be.

Carmakers have big plans for electrics. But it could take years for the industry to reach the production levels battery makers appear to be preparing to supply. General Motors, for instance, will make 20,000 Chevrolet Volts in 2011 and increase the production run to 30,000 in 2012.

Nissan has 17,000 pre-orders for its electric Leaf in the United States, suggesting that production is already sold out for the year. The company will accelerate this modest start with ambitious plans for 500,000 cars worldwide starting in 2013.

For many battery makers, the consequence of long-term oversupply could be catastrophic. A flooded market will push down prices and send profits tumbling. Start-ups with innovative technology could find it hard to survive.

With electric cars starting to reach consumers later this year, the supply-demand debate was a key focus of the first day of the Plug-In 2010 conference in San Jose. The conference brought together some of the leaders of the business: A123, LG Chem’s Compact Power, Electrovaya, Applied Materials and the Johnson Controls-Saft joint venture – and there was little agreement.

At this point, demand is not clear, says Roger Lin, director of product marketing at A123. The adoption of electric cars may be faster than the pessimists believe.

At A123, the company’s capacity is sold out through 2013 and 2014, Lin said.

(EDITOR’S NOTE: The following statement is from Andy Chu, vice president of marketing and communications at A123: “Any statement that A123’s battery production capacity is sold out through 2013 and 2014 is inaccurate. We are sold out through this year and into early 2011.”)

On the other hand, some projections suggest worldwide lithium-ion battery supply could be three times greater than demand. “The upsurge in domestic manufacturing has been a surprise for us,” says Kevin Chen, director of business development at manufacturing-equipment supplier Applied Materials.

Recovery Act funds have played a big role in the build out. One company to benefit is Johnson Controls-Saft. Without stimulus funds, the company would have built a factory in Asia, says John Schaaf Jr., vice president of market development at Johnson Controls.

John Gartner, a senior analyst at Pike Research, says oversupply is possible. He projects that by 2015 the installed price of battery systems (including thermal management gear and other finishing equipment) will be cut in half.

There is the chance for at least a temporary glut, he says. “I think there is a potential for that.”

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Posted by Mark Boslet

Boston-Power Raises $60 Million, Seeks Stimulus Money In China

June 24, 2010

Boston-Power said Friday it raised another $60 million in venture funding as it closes in on stimulus money from China and its first Chinese factory.

The new capital brings financing for the lithium-ion battery maker to $185 million, making it one of the most richly financed start-ups in the industry. The high cost of battery factories makes large bank accounts a necessity.

The Westborough, MA, company said the money should help it win stimulus funding from the Chinese government. CEO Christina Lampe-Onnerud declined to predict how much or provide details on the negotiations. But she said talks with several authorities in the country are continuing and an arrangement is expected in three to four months.

Boston-Power says it expects to announce new electric vehicle deals this year. The company is already working to develop an EV patterned after the Saab 9-3.

A deal will require Boston-Power to build a factory in China, which reportedly will be near Shanghai. Such a deal would represent a major step for a company that was turned down for $100 million in federal stimulus money last August in a bid  to build a U.S. factory.

Separately on Friday, Boston-Power said it is close to announcing deals with additional vehicle manufacturers and utility customers. The announcements are expected later this year.

The company’s first contract, a deal with Saab, was unveiled in December. Lampe-Onnerud said in an interview that the development of an electric car patterned after the Saab 9-3 is on track. The first prototype is to be on the road this summer at Saab’s Trollhattan headquarters in Sweden. More will follow in 2011. The program has production models scheduled for release but has not disclosed the date, she said.

Despite the progress, Boston-Power has no shortage of well-funded competitors. Battery maker A123, which went public in a $378 million IPO in September, raised $266 million prior to the offering and added another $249 million last year with an Energy Department grant.

EnerDel received $118.5 million of government funds, and Warren Buffett put $230 million of his money in Chinese battery maker BYD.

Boston-Power said it would use its new money to expand manufacturing in Taiwan. The company’s plant, owned by GP Batteries, needs scale to supply laptop batteries to Hewlett-Packard and Asus, which Boston-Power added as a customer earlier this month.

The company also will add engineers and sales staff at its Westborough, MA, headquarters and elsewhere.

The five-year-old start-up differentiates itself from rivals by making a lithium-cobalt battery with the same chemistry commonly used in notebooks and by the Tesla Roadster. The technology is modular, meaning that numerous small cells are packed into a single casing, as with laptops. The Saab prototype now under development will have 2,000 small cells clustered together from Boston-Power’s new Swing battery line.

The advantage with lithium cobalt is power and long life – perhaps 1,000 charge cycles compared with 300 or so with more conventional lithium-ion technologies. The downside is the greater chance of a meltdown and short circuit. Alternative chemistries – lithium manganese and lithium phosphates – don’t catch fire, but also don’t have as much power.

Boston-Power says that despite the competition, revenue growth is “very fast.” It declines to offer figures, but says it employs 110 people in Massachusetts, 50 in China and 350 in Taiwan.

“I believe we have the chance to be one of the significant players” in the industry, says Lampe-Onerud. “I think (the funding) will be a very serious signal for big time growth.”

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Posted by Mark Boslet

Western, Chinese Electric Car Companies Forming Bonds Of Convenience

May 27, 2010

EnerDel joined the parade of U.S. and European electric-vehicle companies striking deals with Chinese competitors, announcing on Thursday a joint venture with Chinese auto parts supplier Wanxiang.

The two companies will jointly manufacture lithium ion batteries with an eye on selling to the explosive Chinese car market, now the world’s largest.

Daimler is driving to China, but so is EnerDel, which announced a joint venture Thursday to manufacture lithium-ion betteries in China.

The deal is the most recent in a string of joint ventures underscoring the attractiveness of the rapidly growing Chinese market and the desire of Chinese companies to gain access to advanced Western technologies. By some measures, Chinese technologies trail those in the West and Japan by as much as a decade.

Among the Western interlopers is Germany’s Daimler AG, which early Thursday launched a $88 million joint venture with Chinese battery maker turned car developer BYD to build an electric car for the Chinese market.

Earlier this week, CODA of Santa Monica said it planned to open a Columbus, Ohio, lithium-ion battery factory. Lio Energy Systems, a joint venture between Coda and Chinese company Lishen Power Battery, will operate the plant.

The sometimes surprising bedfellows highlight the bond now forming between otherwise potential adversaries – largely to take advantage of the manufacturing muscle available from Chinese companies. “Our new joint venture is well positioned to make the most of the vast potential of electric mobility in China,” said Dieter Zetsche, Damiler’s chairman.

EnerDel, the battery-making arm of Ener1, said it expects its joint venture to produce 20,000 battery packs annually by year’s end and 40,000 by the end of 2011. The capacity will greatly expand production at the Indianapolis company, which now makes 20,000 battery packs at a facility in Korea and anticipates an additional 30,000 at a soon-to-open Indianapolis plant. A second Indianapolis facility operates at a comparatively modest level.

But does more than raise the company’s global capacity, according to a spokesperson. It gives EnerDel access to the high priority Chinese market. The company did not say what it will invest in the joint venture.

Wanxiang, China’s largest auto-parts supplier, is the majority stakeholder in domestic carmaker Guangzhou Automobile and has supply relationships with vehicle makers SAIC, Chana, Haima and Yutong – all of which are potential battery customers.

Daimlers says its alliance is designed to combine its expertise in electric cars with BYD’s command of battery technology and drive systems. BYD has 3,000 engineers working in Shanghai, with plans to hire more.

The new vehicle will be marketed under a yet unannounced brand. BYD, which counts Warren Buffett among its backers, already has built two electric cars: the hybrid F3DM and the soon to be released e6.

Coda says it is scouting sites for its plant. It also will apply for a manufacturing loan from the Energy Department. The company’s joint venture produces 20,000 battery packs a year in China, but will close the facility when the Ohio operations begin.

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Posted by Mark Boslet

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