Li-ion batteries are the technology of choice for the first generation of all-electric and plug-in hybrid electric vehicles, and the subsequent hype has attracted an increasing number of competitors to an already crowded market. Soon, it will be impossible for all of these companies to survive, making strong partnerships a necessity. This week’s graphic illustrates how developers of Li-ion batteries compare on the Lux Innovation Grid, helping to identify which will make the strongest potential partners as the electric vehicle market matures.
LG Chem Power clearly leads the pack, standing out even amidst its competition in the graphic’s Dominant Quadrant. A subsidiary of LG Chemical, LG Chem owes its strong technical value to its high-energy lithium-manganese-spinel-based cells and strong cycle life, both of which come at costs that are among the most competitive in the market. Its multitude of supply partnerships with the likes of GM, Eaton, and Ford, however, justify the company’s strong business execution score.
Significant enhancements in specific energy and a commensurate reduction in cell costhas garnered Envia Systems the attention of major investors including GM, Asahi Glass, and Asahi Kasei. Yet serious competition remains for Envia in cathode materials, including two major corporations in BASF and Toda Kogyo licensing the same Argonne National Laboratory technology that Envia’s materials are based on.
China is home to a number of top contenders, thanks to the Chinese government’s desire to keep the electric vehicle value chain inside China’s borders (Client registration required.). But batteries from China BAK, BYD, and China Aviation Lithium Battery (CALB) are undifferentiated technologically, and may not share the quality of cells manufactured outside of China.
Last week, Johnson Controls (JCI) filed a petition to dissolve its joint venture with the French battery-maker Saft, which is opposing the proposed breakup. According to a Saft press release, JCI would like to expand the markets for JCI-Saft beyond the originally planned automotive applications, while Saft would prefer the JV not encroach on areas “where Saft is already strongly positioned and enjoys a rapid development.” The JV has found some traction in the automotive market, including agreements to supply batteries to both Ford and Daimler, and both sides indicated that the recent events will not compromise current supply and development relationships.
The dissolution of JCI-Saft would significantly shakeup the intensely competitive electric-vehicle battery market. While governmental support has primed an aggressive build-out for lithium-ion (Li-ion) batteries destined for electric vehicles, growth has been slow and the number of players grabbing firm supply contracts are few and far between (see the report: Small Batteries, Big Sales: The Unlikely Winners in the Electric Vehicle Market – client registration required). LG Chem has emerged as a clear front-runner, while other substantial suppliers like SB LiMotive and JCI-Saft have found more limited success. Trailing the pack are emerging suppliers such as A123 and Ener1 (see also the May 11, 2011 LREVJ – client registration required) which have taken major financial hits due to overly aggressive estimates regarding their electric-vehicle businesses. JCI likely surveyed the landscape and saw that it would be wise to target applications outside of the automotive realm to find more market opportunities for the JV’s Li-ion batteries.
While the consequences of the falling-out remain to be seen, this scenario shows that both parties don’t view the automotive market as the strong growth opportunity that likely drove the original partnership. JCI realizes that it has already missed out on the opportunity to take the initial front-runner position for automotive applications, while Saft appears not to value the automotive market as a big enough opportunity to risk exposing its utility business to JCI via JCI-Saft, where it could be forced to cannibalize existing business.
Additionally, virtually all the major Li-ion producers have recognized that applications outside of automotive will be crucial to justify the major build-out of capacity – with grid storage the most common target. Examples include A123 and Altair Nanotechnologies, both of which made rapid shifts to grid applications once their automotive efforts slowed. While grid storage could be a significant area of growth for Li-ion (see the report: Grid Storage – Islands of Opportunity in a Sea of Failure – client registration required), it remains nearly as uncertain as the automotive market, as the U.S. Federal Energy Regulatory Commission (FERC) still has not determined how energy storage for the grid will be regulated. FERC is considering a pay-for-performance framework in the regulation market, which could potentially place a premium value on Li-ion batteries’ ability to balance supply and demand (frequency regulation). A final determination, however, is not due until sometime in 2012. In the meantime, battery-makers must place bets in both automotive and grid storage knowing that each holds as much peril as promise.