When more than a dozen companies got together last year to form a U.S. car battery consortium, Valence Technology (s VLNC) said no thanks. Now the Texas-based battery maker — which does most of its manufacturing in China — is considering building a battery plant in the U.S. — and has pitted itself against potential rivals for stimulus funds.
While consortium members would need money for R&D, Valence President and CEO Bob Kanode estimated the company could get a plant up and running — and employing people — in the U.S. in less than two years for just $500 million. (Legislators aren’t necessarily against earlier-stage investment: The House version of the stimulus bill includes $1 billion specifically for battery research grants; the Senate version includes $2 billion for advanced battery manufacturing.)
Valence, which released a rather grim quarterly report yesterday, is hardly alone in jockeying for federal funds. And with the ballpark estimate offered by Kanode, it’s not really undercutting competitors on price. A123Systems has requested $1.84 billion to build multiple battery plants in Michigan and other states, and EnerDel has applied for $480 million to double its production capacity for hybrid vehicle battery packs — both under the $25 billion DOE loan program for advanced vehicle manufacturing (separate from the stimulus bill).
But unlike rivals such as A123, the company would rather avoid Motor City and the surrounding region. States with drier climates — and so-called “right to work” laws — such as Texas (where Valence is headquartered), Nevada (where the company has an R&D facility) and Southern states are more likely candidates, according to Kanode.
Why the South? Besides the climate and weaker protections for labor unions, the region has European automakers. Kanode likes the EU’s “deliberate” approach to developing a market for electric vehicles, and he expects companies based there to lead the electrification of the automobile. “This isn’t just a Big Three situation,” Kanode said. “European OEMs are larger than the Big Three, larger than the OEMs of Asia.”
Building a factory in the South would give Valence a leg up if BMW, Mercedes or Volkswagen (which have plants in South Carolina, Alabama and Tennessee, respectively) start shopping around for battery suppliers. Vehicle battery packs are heavy and long-distance shipping costs add up — that’s why General Motors (s GM) opted to assemble packs in Michigan for its Chevy Volt, though the lithium cells will be made in South Korea.
All of this is still very much up in the air, however. Kanode said Valence is still studying whether it could make a U.S. operation profitable after stimulus funds run out. And before it goes whole hog for stimulus funds, the company wants to know what the audit process will look like. Kanode asked, “Will it be a burden for us to administer, or will it be reasonably be done?”