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Electric car battery makers hit the skids

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It’s not a good time to be an electric car battery maker. On Thursday lithium ion battery maker A123 Systems (s AONE) issued a going concern warning and saw its shares drop by close to 8 percent in trading.

The news isn’t a surprise to anyone that’s been following the company, which has been struggling to survive and sells its batteries to auto makers like startup Fisker Automotive. Earlier this month, A123 posted sharply lower revenues and losses for the first quarter of this year, and about two months ago it launched a program to replace batteries with defective cells. The replacement program cost the company dearly, including $51.6 million in warranty costs and an estimated $15.2 million for replacing defective batteries that were in its inventory.

A123 is far from the only battery maker that has struggled in recent months. Earlier this year, battery maker Ener1 filed for voluntary Chapter 11 bankruptcy, and was delisted from the Nasdaq. One of Ener1’s main customers was electric car maker Think, which also headed into bankruptcy.

As the Wall Street Journal points out in an extended article on Thursday, electric car battery makers were the recipients of significant government incentives, and yet the market for electric cars has moved more slowly than expected. The government funding partly created the over supply — and thus these struggles — because the electric car industry is still in an early stage.

A123 Systems received a $249 million matching grant from the Department of Energy to build factories to make at least 500 megawatt-hours of lithium-ion battery capacity per year — a far greater capacity than current demand for electric cars. Ener1 is the parent company of EnerDel, which back to summer 2009 received a $118 million grant from the DOE.

The Wall Street Journal writes:

Since 2009, the Obama administration has awarded more than $1 billion to American companies to make advanced batteries for electric vehicles. Halfway to a six-year goal of producing one million electric and plug-in hybrid vehicles, auto makers are barely at 50,000 cars.

5 Responses to “Electric car battery makers hit the skids”

  1. Jack Rivkin

    Tragic that this company had to go public to get capital to support the government loans while it was still an early stage venture. No such thing these days as patient venture capital. The IPO document had more pages of risk factors than even Facebook. Take a look at this piece written in 2009: .

  2. the Hangin Judge

    Controlled by the Oil Cartels , again.
    They don’t like giving up the gas guzzling carburetor.
    Why else would the manufactures hold back on electric vehicles ?

  3. You have to love that business model. Sibling “news” outlets where one targets far right wingers, and the other targets insane right wing nut-jobs (while making the first outlet look almost unbiased). News Corp does that with other “news” media siblings around the world. Apparently, it works.
    In any case, you have to pay to read the original content, which I’m sure is biased and misleading, as is the line that you quoted:
    >> Halfway to a six-year goal of producing one million
    >> electric and plug-in hybrid vehicles, auto makers are
    >> barely at 50,000 cars
    So what does that mean? Am I suppose to think that if 50K vehicles were produced in the first 3 years that only 100K will be produced after 6 years? And 667K after 40 years? This type of rational is easy to feed to simplistic minds which are comfortable with “linear” thinking.. and not so much with “exponential” growth, and the complexities of terra-forming an entire industry starting with the creation of new technologies.
    (Btw, I can send you links to articles I’ve read in the non-opinion sections of the wsj that deny climate change).