Global car battery industry faces reshuffle

Companies that produce batteries for electric vehicles appear to be ushering in a round of survival of the fittest. The government's practice of providing subsidies to promote this emerging industry may lead to an oversupply situation before 2015. Oliver Hazimeh, partner of PRTM Management Consulting, a subsidiary of PricewaterhouseCoopers LLC in charge of global electric vehicle affairs, said that the demand for batteries will be calculated by using the number of cars produced in the future. It can be clearly seen that overcapacity will occur around 2014 and 2015.

Since the economic recession of 2008 and 2009, the U.S. government has invested about 5 billion U.S. dollars in the electric vehicle industry to ensure that the U.S. auto industry is not behind the international competition. Of this, $2.4 billion will be invested in battery projects.

Bloomberg News Renault and Nissan invested approximately US$5.7 billion to lead the electric vehicle market. The picture above shows the battery packs of Nissan Leaf's electric vehicles. They appeared at the foundation laying ceremony held in May 2010 at the Tennessee factory. The governments of Europe and Asia, especially the Chinese government, also provide incentives. China will spend US$15 billion on alternative automotive technologies in 10 years, and South Korea has committed US$12.5 billion through the “Battery 2020” project (Battery 2020).

Bai Yatian expects that by 2020, the overall size of the global electric vehicle industry will reach 300 billion US dollars, of which battery manufacturers may account for 50 billion US dollars. Hazmeh estimates that the total investment of battery manufacturers during this period will be between 20 billion U.S. dollars and 30 billion U.S. dollars.

Although today's installed capacity is still far below the demand in 2020, as production begins to take off, the already-announced capacity investment will far exceed the expected demand of automakers. It is not expected that every company will survive this overcapacity.

SB LiMotive will start production of electric vehicle batteries in 2013. Its spokesman Udo Rugheimer agrees. He said that between 2015 and 2020, battery manufacturers will be reduced to single digits.

SB LiMotive is a joint venture between German automotive supplier Robert Bosch GmbH and Samsung SDI Co.

With the recent wave of investment in factories in this wave of investment, the problem of overcapacity will become very prominent around 2015. Hazmey said that because technology is still evolving, people are now becoming more cautious and do not want to flood the market with first-generation products too early.

Kevin See, the electric vehicle industry analyst at Lux Research Inc., an independent consultancy specializing in emerging technology consulting, said that the market's enthusiasm has certainly faded because everyone is saying that maybe this market is not for every one. The kind of explosive growth that individuals initially expected was ready.

French carmaker Renault SA recently decided to postpone the start of a battery plant west of Paris to two years until 2014. Kevin West said that this may to some extent Reflect the more cautious attitude of car manufacturers. Renault and its Japanese sister company, Nissan Motor Co., invested 4 billion euros (about US$5.76 billion) to become the world leader in mass production of electric vehicles. Renault Nissan’s chief executive, Carlos Ghosn, is almost at the forefront of evangelism for electric vehicles.

The head of Renault said that the delay in the start of the battery plant was due to Renault and Nissan having decided to reorganize the project. After the reorganization, the project will not have the participation of state-owned partners and will be implemented solely by Renault-Nissan.

Kevin West said that companies like South Korea's LG Chem Ltd. and SB LiMotive are likely to survive. He is not too optimistic about the A123 Systems Inc. and Ener1 Inc. companies in the United States. He said that compared with the larger rivals, the two companies' momentum is inferior. Although both companies have some transportation contracts and some relationships, their strengths cannot be compared with larger competitors such as LG Chemicals.

David Vieau, chief executive of A123 Systems, admits that although there is no excess capacity at present, the industry will inevitably reshuffle over time. A123 Systems is located in Massachusetts, United States.

But Vejo said that the current situation of A123 is more favorable, mainly because they have signed a major contract with General Motors Co.: A123 will be an electric vehicle planned to be launched by General Motors in 2013. Complete battery pack. A123 has 10 transportation contracts and has obtained 10 contracts through the outsourcing of other companies.

As the outside world has doubts about how long it will take for the electric vehicle market to grow, like other battery manufacturers, A123 hedges investment risk by using grid energy storage projects and producing batteries for some commercial applications.

Ener1, a New York-based company, has already adopted a lean manufacturing approach. The company’s chairman and chief executive, Charles Gassenheimer, said that in designing capacity, we are both efficient and flexible. As long as there is demand, we will expand production capacity.