U.S. hybrids rely on Asian battery power
The future of the U.S. auto industry resembles a box of parts for
hybrids, plug-in electrics and fuel cells, which promise to slash oil
demand and provide jobs for another century. But that box comes with a
familiar disclaimer: Batteries not included.
As Detroit's automakers rush to develop vehicles powered by electricity,
they find themselves reliant on foreign sources for the advanced
batteries that will make such technology available to everyday
consumers. While much of the science has been developed in U.S. labs,
Asian companies have a two-decade head start on actually making
That gap concerns U.S. automakers, which often have to shop Asian
manufacturers for the most expensive parts of today's hybrids and their
first generation of plug-in vehicles. The batteries for General Motors
Corp.'s Chevrolet Volt will be made in either South Korea or China,
depending on which supplier is chosen, and likely will cost more than
$10,000 per vehicle.
"One of the reasons for having hybrids is to reduce dependence on
foreign oil," said Sherif Marakby , forFord Motor Co.'s chief engineer
of hybrid core engineering. "You don't want to substitute dependence on
foreign oil with dependence on foreign materials for lithium-ion batteries."
While the first commercial plug-in hybrids have yet to hit the road,
Wall Street already has begun to salivate over the potential for the
market, with estimates of hybrid battery sales approaching $10 billion
annually worldwide by 2015. And if fuel-cell vehicles ever become
commercially feasible, such batteries will come standard.
U.S. automakers and battery companies lobbied Congress for a provision
in last year's energy bill to provide loans and loan guarantees to firms
that want to set up battery production. But Congress hasn't provided any
money for the loans, and appears unlikely to pass many funding bills in
the remainder of its term.
GM spokesman Greg Martin said batteries were different from other auto
parts, which have been rapidly outsourced to low-wage countries in
"Other countries such as Korea and Japan have identified advanced
battery research and production as competitive priorities. We have to
make sure not to cede that competitive race," Martin said. "If we rely
on foreign sources for those products, we still could in a sense be
relying on foreign sources of energy."
U.S. companies have long led the race to research and invent new types
of batteries, and the first lithium-ion designs were developed in the
United States in the late 1980s. But it was Sony Corp. that licensed the
technology first for manufacturing, and since most of the consumer
electronics and computer companies using the batteries were Japanese,
battery suppliers in Japan and other parts of Asia had a natural advantage.
Those advantages have carried over into cars and trucks. Toyota Motor
Corp. and Honda Motor Co. buy the nickel-hydride batteries for their
current hybrids from joint ventures with Japanese battery firms. Honda's
joint venture with Sanyo also builds the batteries for the hybrid Ford
Escape, while Toyota's partnership with Panasonic builds the batteries
for GM and Chrysler hybrid SUVs.
Alexander Karsner, U.S. Department of Energy assistant secretary of
energy efficiency and renewable energy, said Friday that while domestic
battery supply was a concern, it shouldn't be overstated, in part
because much of the research that created today's hybrid batteries
originated in U.S. labs.
"Our challenge is to see that it is produced and deployed here so that
it is available to us and our strategic interest," Karsner said.
Domestic battery production "is an area that requires intensive ...
consistent interest, both throughout the remainder of this
administration, and into the next."
After downplaying plug-in hybrids and lithium-ion batteries for several
years, Toyota said earlier this month that it would launch a plug-in
hybrid in limited production in 2010 using batteries from its Panasonic
unit. Nissan Motor Co. also plans electric vehicles using lithium
batteries from a joint venture that is to begin building batteries next
There are some companies betting that battery manufacturing will cross
back to the United States. Toda Kogyo Corp., a Japanese maker of battery
components, bought a factory in Sarnia, Ontario, earlier this year to
supply lithium-ion parts in North America.
Andreas Jazdanian, marketing manager for Toda America, said the company
expects automakers will need North American battery sources for
vehicles. One reason is logistics: Vehicle batteries will be larger and
more expensive than the lithium-ion cells in phones and music players,
meaning automakers will want tight inventory controls rather than long
"The demand for lithium-ion batteries is forecast to increase
exponentially within the next decade," he said. "I believe there are
already a few domestic candidates that with the right financial support
and competent management are ready to assume production."
One of those may be Enerdel, a joint venture between energy company
Ener1 and Delphi Corp. formed in 2004. Enerdel plans to start building
lithium batteries for the Think electric vehicle later this year at
Delphi's old battery plant in Indiana. Charles Gassenheimer, chairman of
Ener1, said Enerdel's position as the only domestic lithium-ion battery
producer today was a "crucial strategic advantage."
"For a plug-in hybrid, the battery is 50% of the vehicle. You cannot
outsource 50% of the vehicle and have reliable production," he said.
"You have to produce where you sell."