Battery Maker Seeks Role on Electric Cars.

by Cassandra Sweet, The Wall Street Journal, March 24, 2010.
 http://online.wsj.com/article/SB20001424…

Among the companies jockeying for position as the industry for electric vehicles gears up, battery maker A123 Systems is still producing on a small scale but appears to be positioned well in both the U.S. and Asia.

Although it has great potential, A123 has to wait for the production of electric cars and hybrids to really rev up in the next few years. And while it is one of the few U.S. battery companies already in Asia and vying for its vast market, it must battle regional heavyweights with years of experience in making batteries.

The company, born out of the research labs at the Massachusetts Institute of Technology, has impressed both investors and the U.S. government with its proprietary technology. A123 makes lithium-ion batteries for electric and hybrid vehicles and has smaller businesses in batteries for utilities and power tools.

The Watertown, Mass., company received a lot of attention last year when it completed a $378 million initial public offering. Although the stock has been volatile since then, A123’s fortunes are likely to rise or fall along with the electric-vehicle market, which is expected to start rolling in 2012, analysts predict.

“It’s one of those companies whose stock is going to be driven in the near term by momentum in the electric-vehicle segment,” said Vishal Shah, an analyst with Barclays Capital.

Has Plants in China

A123 isn’t profitable yet and probably won’t be until next year, at the earliest. But it is highly thought of. The company was founded in 2001 with a grant from the U.S. Department of Energy, which last year also awarded A123 a $250 million grant to build a factory in Michigan. The company, with about 1,600 employees, already has manufacturing plants in China and South Korea, and is present in a total of 10 countries.

“We’re in discussions with several Chinese vehicle manufacturers and we’re hopeful we’ll be able to close supply agreements with one or more of them,” said Jason Forcier, vice president of A123’s automotive solutions group.

“We’re excited about China,” Mr. Forcier said in an interview. “We have a unique technology that’s different from others in the industry and we think we’re going to do well.”

A123 already makes batteries for hybrid buses made by Daimler AG and U.K. defense contractor BAE Systems. It is working with BMW AG on a hybrid-electric vehicle due on the market in late 2012, and with U.S. start-up Fisker Automotive on its Karma plug-in hybrid luxury sedan, due out later this year.

A123 faces competition, mainly from Asian battery makers like LG Chem Ltd., Panasonic, Sanyo Electric Co. and NEC Electronics and also from U.S. battery maker Ener1 Inc., among others.

Market to Grow

Mr. Shah of Barclays predicts the global market for lithium-ion batteries will grow from $1 billion currently to $13 billion by 2015 and to $56 billion by 2020.

U.S. climate legislation and a global agreement could drive the battery and electric-vehicle markets, but they aren’t as crucial as oil prices, said Mr. Shah.

While electric and plug-in hybrid vehicles like Nissan Motor Co. Leaf and General Motors Co.’s Chevy Volt are expected on the market in moderate numbers over the next year or so, the electric-vehicle market is expected to expand in the next three to five years, Mr. Forcier said.

Analysts agree the main event is at least a year away.

“We continue to believe 2010 is largely a preparatory year for 2011, when consumer transportation products should reach the market,” said ThinkEquity LLC analyst Colin Rusch.