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With Electric Cars Still in the Works, Makers Seek Extra Cash in Batteries

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When Toyota Prius sales sank more than 40 percent last May compared with the same month a year earlier, the automaker blamed it on a global battery shortage. But while the 7 percent drop in fiscal 2009 sales Toyota forecast this week has less to do with batteries and more to do with the global economy, part of Toyota and other automakers’ recovery could have everything to do with supplying parts and technology for all-electric and plug-in hybrid vehicles.

Most electric vehicles now in the works remain at least a year away from production, and further still from profitability. But a growing number of automakers in Europe, Japan and the U.S. are betting that the energy storage component — whether lithium-ion or nickel-hydride — will become a lucrative sideline in a next-generation automotive industry. Moves by companies including Toyota, Daimler, Nissan and Tesla Motors, which aim to supply third-party automakers with battery packs and chargers, may represent some of the first signs of real revenue in the high-tech vehicle market.

As one of the only major automakers to produce its own batteries, Toyota could have an advantage in an electrified vehicle market if battery supply fails to keep up with increasing demand. On the one hand, it could keep the technology for its own use and let other automakers struggle with the shortages Toyota experienced last year. But according to Executive Vice President Masatami Takimoto, Toyota sees an opportunity for new revenue through selling battery packs to rival plug-in hybrid makers. It’s not alone. Nissan said last month that it plans to roll out enough batteries to equip 200,000 electric and hybrid vehicles annually within the next several years (2011 or later) through a joint venture with NEC Global (s 6701.T).

Competition for a piece of the next-gen auto supply pie is not limited to big industry players — not least of all because the Department of Energy’s Advanced Technology Vehicles Manufacturing incentives program has made grants and direct loans available for making batteries and other components for electric, hybrid and plug-in hybrid vehicles.

Silicon Valley startup Tesla Motors, maker of the luxury electric Roadster sports car, has drummed up business with Daimler AG for its battery packs and chargers. Under an agreement revealed at this year’s Detroit Auto Show, Tesla will supply the German automaker with components for a 1,000-vehicle test fleet of electric Smart cars scheduled to hit U.S. roads in 2010 — the startup’s first such deal with a third-party manufacturer.

By way of contrast, rival startup Fisker Automotive plans to stay out of the supply business at least until it secures a market foothold. The company has not reached production for its plug-in hybrid Fisker Karma, and it sees the model’s exclusive powertrain and battery pack from Quantum Technologies as a competitive advantage — and key to getting the vehicle to market fast. “Once we get this to market in numbers,” said Fisker spokesperson Russell Datz in an interview, “plans may change.”

Daimler, which plans to launch an electric version of not only the subcompact Smart, but also a Mercedes sedan, has other pots brewing. The company sources nickel-metal hydride battery packs from Cobasys and lithium-ion packs from Continental AG for its hybrids. But Daimler also owns 90 percent of a joint venture launched two months ago with Germany’s Evonik Industries AG to develop lithium-ion batteries — for its own vehicles and, eventually, third-party manufacturers.

To be sure, components sidelines offer nothing close to a silver bullet for today’s automakers. Many parts manufacturers have come to the brink of bankruptcy as automakers cut production and lenders refuse credit to those doing business with Detroit’s beleaguered Big Three.

At least one of the Big Three could have had a hefty piece of the now-hot battery market. A first-mover in the sector, GM started building sideline nickel-metal hydride business (similar to the one envisioned by Daimler) 15 years ago. But GM ended up selling its stake in a battery venture to Texaco (later acquired by Chevron). Called GM Ovonic, the joint venture with a subsidiary of Michigan’s Energy Conversion Devices launched in 1994 to commercialize nickel-metal hydride batteries for electric vehicles.

Toyota entered the picture two years later with the joint venture Panasonic EV Energy. The company now gets about 70 percent of all hybrid battery sales (most of them nickel-metal hydride batteries for Toyota’s Prius), which customers including Ford, Nissan, and GM itself. GM failed to parlay battery technology licensing and sales into significant revenue, and gave up on its energy storage sideline after a few short years — handing the market to Toyota. In a few years, Daimler, Tesla or Nissan may be ready to give it a run for its money.

Photo of Toyota Prius battery courtesy of Toyota.

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9 Responses to “With Electric Cars Still in the Works, Makers Seek Extra Cash in Batteries”

  1. The Prius is a nice car and you can definitely save money on gas, but there’s some very exciting technology on the way.

    Wheego Electric Cars, a division of RTEV, is officially launching its U.S. dealer network. The first car will be the Wheego Whip, which is most certainly not a smart fortwo, and the plan is to find 50 dealers in America who want to sell them.

    Wheego has an exciting line of electric cars. My driving experience was — I could not drive it enough. The following article has more info on these great electric cars: