After a mad scramble, EV battery shakeout begins

David Sedgwick

Published: February 13, 2012 6:00 am ET

Related to this story

Topics Automotive, Sustainability

DETROIT (Feb. 13, 1:45 p.m. ET) — A shakeout of North America’s electric vehicle battery suppliers is under way.

In January, Ener1 Inc., the New York-based battery maker that owned a stake in bankrupt Norwegian EV producer Think Global, filed for Chapter 11 reorganization.

That same month, A123 Systems of Waltham, Mass., laid off 35 percent of its workers at two Michigan plants after reducing its revenue outlook for 2011.

Meanwhile, Boston-Power Inc. of Westborough, Mass., plans to move the bulk of its operations to China, where the government is offering big subsidies to bolster the EV industry.

Given slow sales of the Chevrolet Volt and Nissan Leaf, some industry insiders have predicted it will take another decade or so for the U.S. market to generate high-volume sales of EVs. Battery makers appear to have gotten ahead of the market: One study says “excessively grand expansion plans” would result in production capacity at twice the level of market demand by 2015.

A shakeout was inevitable, says industry consultant Jon Bereisa.

“There was a mad scramble” by startup companies to produce lithium ion batteries, said Bereisa, CEO of Auto Lectrification, a suburban Detroit consulting firm, “but the EV industry can’t absorb all that capacity.”

Which suppliers have the deep pockets to wait for the market to develop? And which suppliers can afford to develop the second- and third-generation batteries?

Deep pockets

According to an industry study published last September by Roland Berger Strategy Consultants, these key suppliers have emerged:

• A123 is expected to be a leading supplier of batteries for EV buses. It also will produce batteries for the Chevrolet Spark EV.

• LG Chem Ltd., South Korea’s biggest chemical company, makes batteries for the Chevrolet Volt.

• NEC Corp., a Japanese electronics multinational, formed a joint venture with Nissan Motor Co. to produce batteries.

• Panasonic Corp., the consumer electronics giant, makes batteries for the Toyota Prius hybrid.

• SB Limotive, a joint venture between Korean electronics giant Samsung SDI and Robert Bosch GmbH, will supply EV batteries for BMW.

With the prominent exception of A123, all of these ventures are very, very large companies with deep pockets.

For example, SB Limotive disclosed last September that it would invest $500 million on product development and tooling by 2013. Meanwhile, LG Chem announced last April that it will spend $1.8 billion over the next year or so to expand battery production.

In its report, Berger predicts that the five leading companies will control 80 percent of the global EV battery market by 2015. Since Berger expects there will be twice as much production capacity as needed by 2015, the consulting firm predicts a shakeout.

“Some of the battery producers have excessively grand expansion plans,” wrote Wolfgang Bernhart, who authored the study. “This is why we’ll see considerable consolidation across the market going forward.”

A123 soon may fall off Berger’s list of key battery suppliers. Its largest customer, Fisker Automotive Inc., said on Feb. 6 that it has halted work at its Wilmington, Del., plant to prepare the factory to build plug-in hybrids.

Because A123 lacks the financial resources of an NEC, LG Chem or Panasonic, it is unclear how the company will handle the loss of a major customer.

Moreover, some other megasuppliers are trying to muscle into the battery market. SK Innovation Co., a South Korean energy conglomerate, is building a $1 billion plant to produce lithium ion batteries for its new joint venture with Continental AG.

In a Jan. 10 interview, Continental CEO Elmar Degenhart said it would take another decade to develop batteries cheap enough to spur high-volume EV sales.

“You can’t expect to make big profits four or five years from now,” he said. “There are a lot of small players [in the EV battery market]. We believe the smaller players will disappear.”

Bet on China

So how do the small suppliers plan to survive this shakeout? Boston-Power, which has raised $360 million in capital since it was founded in 2005, is betting its future on China.

The company is building a battery plant near Shanghai plus an R&D center in Beijing.

Once Boston-Power builds its battery plant this year, it will compete for EV contracts, said company founder Christina Lampe-Onnerud.

But how will Boston-Power raise enough money to compete with the behemoths? Once the company establishes a niche in China, it might raise more funds to expand. Or it might form an alliance with a larger partner — perhaps an automaker.

“I do believe automakers will not treat batteries as just another part of their supply chain,” she said. “They’ll have to own at least part of this industry. It’s my goal to keep our options open.”


Comments

After a mad scramble, EV battery shakeout begins

David Sedgwick

Published: February 13, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

Ineos making its UK shale play

November 21, 2014 9:29 am ET

Chemical giant Ineos Group AG is planning to be the biggest player in the United Kingdom's shale gas industry.    More

Image

High pressure RTM systems moving from Europe to Mexico

November 20, 2014 4:24 pm ET

Engel Holding GmbH's subsidiary in Mexico says it has sold the first high pressure resin transfer machine system (HP-RTM) in the Americas to a...    More

Image

Thomson Plastics opens N.C. plant

November 20, 2014 3:12 pm ET

Custom injection molder Thomson Plastics Inc. has opened a new manufacturing facility in Lexington, N.C.    More

Image

New York City officials avoid taking a stand on plastic bag fee

November 20, 2014 11:28 am ET

New York Mayor Bill de Blasio's administration claimed Nov. 19 to be committed to dramatically reducing plastic bag consumption in New York City, but ...    More

Image

Agilyx facing nearly $50,000 in fines from Oregon DEQ

November 20, 2014 11:59 am ET

Agilyx Corp., a plastic waste-to-oil company, is facing nearly $50,000 in fines for alleged hazardous waste violations at its Tigard, Ore., research f...    More

Market Reports

Plastics in Brazil - State of the Industry Report

This in-depth report examines the Brazilian plastics industry from a historical and geographical context. Our analysts provide insight on economic trends and forecasts, growing manufacturing sectors that utilize plastics, private investment opportunities, market environment challenges, and innovations in R&D.

Data tables and charts on producer prices, trade, plastics production and end market indicators is also included.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Injection Molders Market Report & Ranking 2014

This special package contains our 132-page 2014 Market Report on the Injection Molding segment and our exclusive 2014 RANKINGS database of 500+ Injection Molders for a discounted package price.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

October 27, 2015 - October 29, 2015Plastics Financial Summit - New York - 2015

More Events