China has become the golden land of opportunity for American cleantech companies, especially those who need to line up big financial backers to grow. Boston-Power, which once dreamed of building a lithium-ion cell battery factory in the U.S., announced Tuesday that it has lined up $125 million in funding to shift a big part of its business to China and thin its operation in the U.S. by about 35 percent.
The $125 million is a mix of private equity and promises of grants, loans and tax breaks from central and local Chinese governments in the Beijing and Shanghai regions, money that will enable the battery cell developer to expand manufacturing and sales, particularly in the electric vehicle market, said company founder Christina Lampe-Önnerud.
Lampe-Önnerud declined to disclose which level of Chinese government is providing the help or the equity amount, which is coming from China-based GSR Ventures and existing investors Oak Investment Partners and Foundation Asset Management. Lampe-Önnerud said GSR is leading a yet-to-be closed fundraising round, and more information will be available after the fundraising is complete. Before the latest funding round, Boston-Power had raised $192 million in equity since its inception in 2005.
With the investments, Boston-Power will undergo a significant transformation. The startup will shift the bulk of its operation to China, where it plans to build a lithium-ion battery cell factory near Shanghai and a technology center in Beijing where its staff will work with customers to integrate Boston-Power’s cells into electric drivetrains. Research and development, along with customer support and sales, will remain at its current headquarters in Westborough, Mass.
The company plans to lay off about 30 people in its U.S. operation, or about 35 percent of its workforce in the country, said Lampe-Önnerud. The company has about 110 employees and 40 contractors worldwide.
Life ahead in China
The company expects to break ground on the factory project in about six weeks and start shipping battery cells in about 18 months, Lampe-Önnerud said. The factory will be able to produce 400 megawatt hours of battery cells, or 18 million battery cells, per year. Boston-Power plans to continue its manufacturing relationship with Taiwan’s GP Batteries, which has allocated 125 megawatt hours of production lines for Boston-Power, Lampe-Önnerud.
The company previously tried to get a $100 million loan from the U.S. Department of Energy in 2009 to build a factory in Massachusetts but didn’t end up getting it.
China apparently has become the place to be for battery industry and other cleantech companies because of the country’s plan to support cleantech development for domestic consumption and exports. “I’m impressed and inspired by China’s commitment to cleantech,” Lampe-Önnerud said. “We have customer trials in the U.S., Europe and other Asian countries. But China is the most aggressive in deployment.”
Her sentiment has been echoed by other American companies. A123 Systems, a lithium-ion battery cell company (s AONE) announced last November it had formed a joint venture with Shanghai Automotive Industry Corp. (SAIC) to supply battery packs for SAIC’s electric cars.
Many battery cell developers also believe China will be a huge market for energy storage systems for supplying backup power and banking renewable electricity from solar and wind farms. A123 and ZBB are among those that have laid out plans to tackling the Chinese market.
China certainly has been the hub of battery manufacturing, due partly to its large base of consumer electronic factories that roll out gadgets such as laptops and iPads. (s aapl) Leyden Energy, a lithium-ion battery cell startup in Fremont, Calif., contracts with factories in China to produce its cells. Los Angeles-based electric car company, Coda Automotive, created a joint venture with Chinese battery maker, Lishen, last year. Last week, Coda said it had bought a battery management company, EnergyCS, to help it enter the energy storage market.
Boston-Power is interviewing for a CEO and CFO. Boston-Power’s previous CEO, Keith Schmid, lasted only seven months, according to news reports last week. The CFO and the head of marketing also left.
Lampe-Önnerud was reluctant to discuss the reason for Schmidt’s departure, but did say, “The company is moving most of its activities to China. It makes sense for the company to have leadership in China. I think we need Chinese-facing leadership.”
The company’s first products were laptop batteries for Hewlett-Packard (s HPQ). It worked with Saab before and delivered batteries for testing. But Saab has struggled and has yet to launch any electric vehicles. The battery cell company unveiled a new car battery technology in June this year and talked about working with customers aside from Saab. Last week, Boston-Power announced it was teaming up with Protean to provide batteries and other car components to Brabus, which customizes cars such as Mercedes-Benz in Germany. Boston-Power said its batteries resided in two Brabus-modified Mercedes-Benz E Class that exhibited at the Frankfurt Motor Show.
Lampe-Önnerud remained tight-lipped about customers, saying she hopes to announce one in China shortly.