In a recent article "How to Make Money out of Traction Batteries" in BEST, we wrote, "Kamikaze romantics. Undercapitalised little companies choosing to meet $100 billion leviathans head on, protected only by their magic potion. Welcome the world of traction batteries."
We advocated niche marketing for most traction battery manufacturers before it is too late and we gave several examples of successful niche marketing that avoids the impending battle to dominate the sale of car traction batteries. After all, on our estimates, about half the money spent on electric vehicles over the next ten years will be spent on vehicles other than cars.
Too many suppliers are mesmerised by cars. On the other hand, BAE Systems is involved in electric vehicles for land, sea and air and yet it steers clear of cars. Supporting companies such as this one are specialist traction battery companies such as Valence Technology and Electrovaya. The smaller traction battery manufacturers would be wise to investigate supplying a company such as Fiat Group with its specialist requirements before looking at its mainstream cars. For example, FIAT Group subsidiary CNH is the second largest agricultural equipment manufacturer in the world after Deere & Company. FIAT is also the third largest producer of construction equipment after Caterpillar Inc. and Komatsu. Research Center Fiat supports all this.
Now the news is coming in that the predicted car traction battery shakeout has begun.
Panasonic Corp. and Samsung SDI Co., are the world's two largest makers of rechargeable batteries in general, and they deepened price cuts in 2010 as overproduction worsened a glut in the industry. Lithium-ion battery prices may have dropped 19% by the end of 2010, the biggest drop in five years, says Hideo Takeshita, an analyst at the Institute of Information Technology Ltd. in Tokyo. Indeed, Shiro Mikoshiba, an analyst at Nomura Holdings Inc., says the worsening oversupply may push prices down as much as 25 percent.
Japan vs. South Korea
Battery makers in Japan and South Korea, accounting for 75% of global production, are sacrificing profit for market share as the largest market for rechargeable batteries by value now becomes cars. This will help triple sales of lithium-ion cells in six years. It is not all bad news. Cheaper batteries may lead to lower electric car costs at carmakers such as Nissan Motor Co., whose all-electric $32,780 Leaf sedan has sales partly constrained by price.
"Battery makers will probably go through a tough time with falling prices," said Mitsushige Akino at Ichiyoshi Investment Management Co., "The business may become lucrative only for a couple of companies with dominant market share. Others may never be able to make money."
South Korean battery makers including Samsung and LG Chem Ltd. may better cope with lower prices than Japanese rivals because they purchase materials more cheaply from China and have faster production, Takeshita said. The won's weakness against the yen also makes Korean products more competitive, he said.
"We anticipate the harsh price competition with South Korean makers will continue," said Akira Kadota, a spokesman at Osaka-based Panasonic. "We are reviewing our production process to strengthen our cost competitiveness so that we can win the battle."
In August, the South Koreans announced another success. President Lee Myung-bak and visiting Bolivian President Evo Morales agreed that Korean businesses will take part in the extraction of vast lithium reserves under Lake Uyuni in the South American country. Korea is the first country to participate in the development of Bolivia's lithium mines, beating contestants from Japan, France and China to the deal.
China has problems
However, China has problems competing. It does not have the most appealing battery technology and the best quality and it cannot corner the supply of lithium, unlike the lanthanum in the NiMH batteries that are on the way out. Third generation traction batteries with higher energy density are made by Oxis Energy, PolyPlus Battery Company Inc and others in the West and one type has already flown in an electric aircraft. China has some catching up to do in this respect as well. Its rigged exchange rate may not last forever.
$30 Billion Industry - two thirds vehicle traction
Samsung SDI, based in Yongin, South Korea, will probably overtake Panasonic's Sanyo as the world's top producer of lithium-ion batteries in 2010, according to estimates at the Institute of Information Technology. LG Chem, the third-largest maker of rechargeable batteries, expects price drops to persist, spokesman Terry Lee said. Falling prices of the product will not have a serious impact on the company's profit because LG Chem is buying lithium at competitive prices, he said.
At stake is leadership in an industry that Panasonic estimates will grow to 2.5 trillion yen ($30 billion) by 2015 from 926 billion yen last year. On IDTechEx figures, two thirds of that will be traction batteries - see Electric Vehicles 2010-2020. Also read: Car Traction Batteries - the New Gold Rush 2010-2020
Shipments of lithium-ion batteries, of which traction batteries form a part - are estimated to rise 31 percent in 2010, after a 2 percent drop last year, according to the Institute of Information Technology.
Electric Vehicles
Sales of batteries in electric, hybrid and plug-in hybrid cars will increase to 1.7 trillion yen in 2020 from almost zero in 2009, according to March estimates at Daiwa Securities Group Inc.
Heavy investment
Panasonic has pledged to invest 300 billion yen in energy-related products over three years. It started production of lithium-ion cells at another factory in Osaka in April, aiming to double its annual production to 600 million units. The company aims to triple sales of lithium-ion cells by March 2016, Naoto Noguchi, president of Panasonic's battery unit, said in a recent interview.
Sony Corp. is spending 40 billion yen to boost its monthly production capacity this year 80% up on 2008. The company built a battery plant north of Tokyo in March and is adding facilities in Singapore and China. Sony anticipates a difficult environment for the battery business because of competition and price declines, says Tomio Takizawa, its spokesman.
Samsung Group, whose units include SDI and top television- maker Samsung Electronics Co., said in May it plans to invest 5.4 trillion won ($4.5 billion) in batteries for electric vehicles by 2020.
"It's a battle between the South Korean and Japanese makers," Takeshita says. "They're playing a game of endurance that's eroding profitability."
For more attend: Future of Electric Vehicles which uniquely covers the whole electric vehicle market - land, sea, air whether hybrid or pure EV - with emphasis on future breakthroughs.
