News Technology Electric vehicle choices grow, but will consumer base?
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** Editor’s note: This article has been altered from its original version. It contains corrections about A123’s business. The company serves 22 vehicle lines, not 22 automakers as originally stated. Also, it does not make batteries for the GM Voltec platform, as the initial version stated. It will, however, supply batteries for the Chevrolet Spark EV.
By Mike Brennan | MiBiz
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Ford unveiled its stylish 2013 Fusion at the 2012 North American International Auto Show. The automaker hopes to leverage the midsize sedan platform for a range of powertrains, including gasoline, hybrid and plug-in hybrid models. PHOTO: JOE BOOMGAARD |
DETROIT — More than a dozen of the 41 new vehicles launched during the press preview of the 2012 North American International Auto Show in Detroit were hybrid, plug-in hybrid electric or all-electric vehicles.
But last year, only 20,000 full-electric or plug-in electric hybrids were sold in the United States, including 9,674 Nissan Leafs and less than 8,000 Chevrolet Volts, compared to nearly 269,000 hybrids — roughly 2.4 percent of total U.S. auto sales.
That small market penetration begs the question of why EVs and hybrids are garnering so much hype from automakers. Specifically for Michigan, where a handful of electric vehicle battery makers have set up shop, many wonder how this tepid demand can generate the 5,000 battery-related jobs predicted by former Gov. Jennifer Granholm.
The question, many pundits contend, revolves around creating economies of scale domestically. While the auto market has garnered much of the attention so far — with President Obama calling for one million electric or plug-in vehicles on the road by 2015 — few say vehicles alone can drive the AES industry.
Tougher fuel economy standards, a bump in oil prices, updated technology and modern assembly lines that can build electric vehicles alongside internal combustion engines have all revived interest in electric vehicles.
But shorter term, putting lithium-ion batteries in commercial vehicles and plugging these battery packs into the electric grid, while less sexy than electric cars, will drive manufacturing in greater numbers that ultimately will drive down the costs to buy electric cars, said Becky Fitzgerald, a spokesperson for Johnson Controls Inc.
In September 2010, JCI launched assembly at its lithium-ion battery plant in Holland. Last summer, the plant shifted to full manufacturing. The Holland JCI plant now employs about 95 people and may employ 300 when the plant reaches full capacity, she said.
“We don’t think mass commercialization will be proven in just the auto fleet,” she said. “The higher costs for electric vehicles, the lack of electric-vehicle infrastructure, other technologies becoming available … will all limit electric car sales. We’re seeing more efficient power trains, even with internal combustion engines,” Fitzgerald said.
Also in Holland, the much-herald LG Chem Compact Power plant is rising from the cornfields. Someday the company hopes to employ around 700 people, company executives have said. The price tag for the $303 million factory has been underwritten with $151 million in federal grants.
Across the state in Livonia, A123 received a $249.1 million economic stimulus grant from the U.S. Department of Energy in August 2009. The Michigan Economic Development Corp. in spring 2009 gave A123 tax credits and incentives that totaled $125 million, which followed a $10 million cash grant in fall 2008.
A123 has built the largest lithium-ion battery plant in America, where the company makes battery packs for 22 vehicle programs. The contracts continue to come in: In 2011, the company was selected to supply batteries for the Chevrolet Spark EV.
In exchange for the grants and tax breaks, A123 promised to create thousands of new advanced technology jobs in Michigan. A123 has become the poster child for the promise of advanced battery manufacturing in Michigan. In September 2010, President Obama pointed to A123 and said it would create at least 3,000 jobs. In November 2009, then Gov. Jennifer Granholm predicted A123 would employ 5,000.
While A123 did crack the 1,000-job barrier last summer, a hiccup last fall by its largest customer, California-based electric vehicle startup Fisker Automotive, forced A123 to lay off 125 workers at plants in Livonia and Romulus. With a corresponding shake out for temporary contractors, the company employs about 700 in Michigan today.
Fisker’s delays and A123’s corresponding troubles come as several major companies are pursuing battery manufacturing plant expansions in Michigan, operations largely supported by federal and state tax dollars. JCI, A123, LG Chem and Dow Chemical in Midland all have been the beneficiaries of $2.1 billion in tax credits and about $1 billion in federal stimulus grants so far. Collectively, state and federal experts projected the battery expansions would create 64,000 jobs directly and indirectly.
The slow start for the EV industry has many wondering just when those jobs will materialize.
MEDC industry analyst Eric Shreffler said the agency’s battery tax incentives program included a vigorous vetting process, employing federal scientists and third-party experts to analyze incentive applications.
He acknowledged the “potential for (a) shakeout” at some point, but said Michigan’s battery companies are already diversifying their client base by securing customers in the electrical grid, commercial and military markets.
“The companies Michigan has invested in, from a global perspective, have as good of an opportunity as anyone to be successful for many years down the road,” Shreffler said.
“We really are at the beginning stages of this, and I think you’re going to see, just like in any new innovative technology, that there’s going to be some ups and downs,” he said. “Clearly, we hope that we never have to see layoffs and things like that, but I think it would be very foolish for us to be knee-jerk and say the sky is falling here.”
One of the largest threats to the growth of Michigan’s battery industry is the high cost of the technology itself, which translates into expensive vehicles. For example, GM’s Volt starts at about $40,000, and Nissan’s pure electric Leaf costs more than $30,000, before a $7,500 tax credit kicks in.
Steep price premiums for EVs will mean battery makers will have to look to demands elsewhere, including to commercial vehicles, the military and the electric power grid, said Jeff Kessen, Director of Transportation Marketing at A123.
Last fall, the Federal Energy Regulatory Commission passed a mandate to support energy storage technologies that can provide quick bursts of power to the grid to help it run more smoothly. Energy storage businesses, particularly those using flywheels and batteries, such as A123 Systems, will sell a lot more equipment.
“Forty percent of our business is energy storage on the grid,” Kessen said. “That’s a booming market because of changes from the Federal Energy Regulatory Commission. It has helped diversify our demand.”
A123 says it is also targeting growth with commercial vehicles, such as utility trucks and vans.
One potential target could be Ford Motor Co., which is prepping a next-generation Transit van for the North American market as part of ongoing upgrades to its commercial vehicle lineup. In the 2013 calendar year, the updated Transit will join the automaker’s other Class 1 through Class 7 commercial vehicle offerings.
New entrant in the marketplace, Via Motors is pairing a 4.3-liter V6 with an electric generator powered by a 24 kWh liquid-cooled lithium-ion battery pack to deliver up to 40 miles of zero-emission range. The battery pack is made by A123.
The vehicle’s electric generator can power the vehicle for an additional 400 miles after the electric range is exhausted. The company expected its trucks to achieve an equivalent rating of 100 miles per gallon when running in electric mode.
Demand for electric vehicles — both pure battery electric vehicles and plug-in hybrids — is expected to grow to 839,000 vehicles globally by 2014, accounting for just 1 to 2 percent of the total global vehicle market. Even that demand growth requires growth of manufacturing capacity in the U.S., Kessen said.
This growth will, however, be accompanied by massive overcapacity. Over the next few years, the industry will see lithium-ion battery production exceeding demand by a factor of two, recent reports have indicated.
A study by Roland Berger Strategy Consultants found that the light vehicle segment will account for more than 80 percent of total market value for lithium-ion battery systems in 2015. RBSC expects the global market for the advanced batteries to grow from $1.5 billion to $9 billion in 2015. In a best-case scenario, the company predicts the global market to grow to more than $50 billion by 2020.
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