Japan’s Hitachi Remains Focused on Hybrids

TOKYO – Nissan Motor Co. Ltd. and long-time development partner and supplier Hitachi Ltd. are taking different paths these days in a critical new marketing area.

Nissan chose to skip hybrids and focus on all-electric vehicles, instead, partnering with NEC Corp. to produce lithium-ion batteries for its Leaf small car, scheduled to launch this December.

In contrast, Hitachi is skeptical about the near- and medium-term prospects for battery-powered EVs, but is bullish about hybrids.

“In 2020, EVs will account for (less than) 5% of global vehicle sales, while plug-in hybrids and conventional HEVs will each have almost 15% of the market,” says Yasuhiro Nemoto, a research executive at Hitachi Automotive Systems Ltd., a subsidiary formed a year ago to enhance Hitachi’s ambitions to become a mega-supplier of automotive components.

Hitachi Automotive Systems currently supplies motors, inverters and Li-ion batteries to Eaton Corp. for the powertrain supplier’s fleet of hybrid delivery trucks used by FedEx Corp., United Parcel Service Inc. and others.

Hitachi batteries can be fitted in cars as well and have been selected by General Motors Co. for its new mild-hybrid series due in 2011.

Ward’s reported last year that GM’s second-generation belt-alternator-starter technology is expected to appear in the new 2.4L direct-injection gasoline Buick Regal when production of the sedan shifts in first-quarter 2011 to Oshawa, ON, Canada, from Russelsheim, Germany.

The new BAS system provides a 20% boost in fuel economy and suggests it could serve as the basis for future GM powertrains.

Hitachi supplies VVEL system for Nissan G37.

In addition to batteries, Hitachi makes stop/start systems for UD Trucks Corp., formerly Nissan Diesel Motor Co. Ltd. and now a Volvo Group subsidiary.

Nissan will remain the primary customer for Hitachi’s conventional automotive components, principally, suspension and braking systems and parts; shock absorbers; propeller shafts; power-steering controls; fuel pumps; high-pressure injectors; and electronic control units and sensors.

But the company is eager to sell hybrid-related products as well, including Li-ion batteries, and along with GM, has business with Isuzu Motors Ltd. and several other auto makers.

Hitachi expects the conversion from nickel-metal-hydride to Li-ion batteries will begin about 2015 and projects global battery-cell production of both types to expand 10-fold from current levels by 2020.

The largest growth, says Nemoto, will occur in China, where analysts expect total demand for all vehicles to reach 20 million to 25 million units. The central government reportedly will invest some $15 billion in EVs and hybrids.

By 2015, Hitachi anticipates battery costs will fall slightly below $1,000/kWh, from $1,200- $1,500/kWh at present, but it is skeptical about a drop to $500/kWh levels by 2020. Many analysts believe $250/kWh is the threshhold at which EVs would become widely adopted by the public.

Hitachi produced its first Li-ion battery in 2000 and in 2004 formed Hitachi Vehicle Energy Ltd. to develop, manufacture and market the batteries for hybrids.

The joint venture, capitalized at ¥7.5 billion ($88 million), is 65% owned by Hitachi, 25% by Shin-Kobe Electric Machinery Co. Ltd. and 10% by Hitachi Maxell Ltd. Through fiscal 2009, ended March 31, 2010, it had produced 900,000 cells for an estimated 50,000 hybrid trucks.

The JV last October opened a new 300,000-cell-per-month production line in Tokyo’s Hitachi-machi, Ibaraki prefecture, to produce third-generation Li-ion batteries with an output density of 3 kW/kg, 15% higher than the second-generation unit in the Isuzu Elf Diesel Hybrid.

Nissan partnered with NEC, not Hitachi, for Leaf EV’s Li-ion batteries.

The plant’s older, second-generation line, in operation since 2004, can produce 40,000 cells per month, raising combined monthly capacity to 340,000.

Earlier in 2009, Hitachi Vehicle Energy announced development of a battery with power density of 4.5 kW/kg and began sending samples to auto makers. Power was increased by adopting a new manganese cathode and improving battery structure by using thinner electrodes to reduce internal resistance.

The prototype battery was displayed at the 2009 Japan Society of Automotive Engineers’ Automotive Engineering Exposition in Yokohama.

On display at the First International Rechargeable Battery Expo in Tokyo in March was a new battery for plug-in hybrids with 25-Ah capacity, which will permit cars to run 12 miles (20 km) in EV mode. The battery incorporates a new electrode and heat-resistant separator that prevents internal short-circuiting, drastically improving safety, the supplier says.

Hitachi’s hybrid-battery plans tell only part of its story. The company and its affiliates have been producing auto components for nearly 80 years and in 1964 established the Automotive Products Div., the same year it became an electronics supplier to Nissan.

When Nissan began a major restructuring in late-1999 and was forced to sell off parts of its supplier group to raise cash, Hitachi picked up some major pieces, including the former Unisia JECS Corp., Tokiko Ltd. and Clarion Co.

Last summer, the renamed Automotive Systems Div. became a full-fledged subsidiary – Hitachi Automotive Systems Ltd. – with paid-in capital of ¥15 billion ($178 million).

In fiscal2009, Hitachi Automotive Systems reported sales of ¥638.8 billion ($7.5 billion), with powertrain and electronic-control systems, including hybrid components, accounting for 20%.

Sales, which peaked at ¥889 billion ($10.5 billion) in fiscal 2007 when the supplier was still a division of Hitachi Ltd., fell 23% in fiscal 2008, dragging earnings down sharply to a loss of ¥60.6 billion ($714 million).

Although sales declined again in fiscal 2009, by 6%, losses eased to ¥5.1 billion ($50 million) due to aggressive cost-cutting.

For fiscal 2010, the supplier is forecasting growth in both sales and earnings to ¥680 billion ($8 billion) and ¥17 billion ($200 million), respectively.

Management is targeting sales of ¥750 billion ($8.8 billion) in fiscal 2012 and ¥1 trillion ($11.8 billion) in fiscal 2015. Further, the supplier is aiming for an operating margin of 4.5% and earnings of ¥33.7 billion ($397 million) in fiscal 2012.

An operating margin of more than 5%, with earnings exceeding ¥50 billion ($588 million), is forecast for fiscal 2015.

Driving that growth will be electronics. The company expects sensors, controllers and an array of by-wire systems to account for 40% of total vehicle cost in 2015, up from 20% in 2004. Nemoto believes the percentage could go as high as 80%.

The supplier projects more than a three-fold increase in sales of hybrid systems and components, including Li-ion batteries, and a two-fold increase in gasoline direct-injection, variable-valve-timing and variable-valve event and lift (VVEL) systems by fiscal 2015.

Hitachi Automotive Systems supplies VVEL systems for Nissan's 370Z and G37 coupes and Patrol SUV.

In the plug-in hybrid sector, the supplier is aiming to increase driving range 30% in EV mode over the next five years through system improvements and integration. Specifically, it plans is to reduce inverter size by one-third and raise energy and power output of its Li-ion batteries to 120 Wh/kg and 2,400 W/kg.

Nemoto believes improving conventional engines can reduce carbon-dioxide emissions and deliver 15%-20% better fuel economy, while such things as vehicle-weight reduction, improved valve timing and more intelligent combustion sensors can yield another 10% savings.

Concerning Hitachi's regional strategy, the supplier declines to provide specifics but foresees major growth in China and the rest of Asia, excluding Japan, with sales doubling by fiscal 2015.

As the global outlook for Hitachi steadily brightens, being a contrarian appears to have been a smart move.