Final Inspection

Batteries Not Included

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Look for the next capacity glut to center on electric-vehicle batteries.

In recent months, plans for more than a half dozen new plants designed to produce lithium-ion batteries for electric and hybrid vehicles have been announced in the U.S.

The list includes LG Chem’s planned battery operation in Holland, MI, near a Li-ion cell plant to come from Johnson Controls-Saft, as well as a pack-manufacturing facility Magna says it may or may not build at a still undetermined site.

Ford is bringing Li-ion battery production in-house to its Rawsonville, MI, facility for its next-gen hybrids, while upstart California-based EV maker Coda Automotive says it will set up battery operations in Ohio.

These latest are on top of previously announced or already established plants from General Motors in Brownstown Township, MI; Saft America in Jacksonville, FL; and A123Systems in Livonia, MI.

Add to that all the existing and upcoming capacity elsewhere, including JCI-Saft and Dow Kokam facilities in Europe and the ton of capacity on the way in South Korea, China and Japan, and there suddenly is an awful lot of battery-building capability springing up around the world.

This despite the fact hybrids still make up only a fraction of global vehicle sales and EVs are all-but non-existent and their future far from certain.

So what’s driving all the new capacity?

Certainly, a bullish vision of battery power’s future is a big part of it. While most of these operations may start small, they are eying much higher volumes under the assumption plug-in hybrid and EV demand will rise as costs decline and pressure to ratchet up fuel-economy increases.

LG Chem, for instance, ultimately is targeting production of up to 200,000 battery packs annually at the upcoming Michigan facility, and Coda is imagining the day when its Ohio plant will employ some 1,000 workers.

Ener1, which will supply batteries for Fisker hybrid luxury cars, says its Indiana operation has capacity for 120,000 battery packs annually and will employ 3,000 workers eventually.

Nissan bills its upcoming operation in Smyrna, TN, as “one of the largest vehicle battery manufacturing plants in North America,” with capability to assemble 200,000 packs annually.

But also driving the rush for new capacity is a pile of government money courtesy of the Department of Energy and individual states and local communities. The outlays promise to cover significant portions of plant construction and tooling, making the costly bet on unsecured future business a much more palatable risk for suppliers.

Half of the price tag for LG Chem’s $303 million Holland plant is being funded via federal grants and state and local tax credits. Saft America is getting a $95 million grant from the U.S. to put toward its $200 million Jacksonville facility. GM’s Brownstown operation was backed by $106 million in federal aid.

Only a couple years ago, U.S. officials worried out loud that the next wave in vehicle battery technology would follow the last one, with all the development capability and production capacity centered in Asia. As a result of all that angst, the DOE put up $2 billion in vehicle-electrification grants to lure R&D and manufacturing here.

Score that as a mission accomplished.

But other countries are offering incentives too, unwilling to cede too much next-gen battery turf to the U.S., potentially creating a worldwide glut.

And, unfortunately for both suppliers and taxpayers, some of today’s promising new manufacturing plants may end up tomorrow’s white elephants.

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David E. Zoia

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