Top US lithium-ion battery makers struggle to stay afloat

Two major US suppliers of lithium-ion batteries, the power source used in electric vehicles (EV), are feeling the sting of slow EV sales. With full electric cars generating less than 1% of total vehicle sales, Texas-based Valence Technology saw its shares sink yesterday after filing a voluntary petition for Chapter 11 bankruptcy protection last week. Meanwhile, Massachusetts-based rival A123 Systems reportedly has enough cash to keep it operating for about five months and is trying to raise about $40 million to keep going.

In fiscal 2012 Valence saw its revenue drop to $44.4 million from $45.9 million in 2011. It also reported an operating loss of $9.6 million in 2012 compared to $9 million in 2011. Debt levels reached $82.6 million at year end March 31.

So why are these lithium-ion battery makers teetering on the brink? One key factor is that the cost of lithium-ion batteries used in EVs is high, which also means that the cost of the finished vehicle passed on to the consumer is higher than a standard car. As many analysts suggest, the cost of lithium-ion batteries will need to come down significantly before the mass market will adopt the cars on a larger scale.

One day before Valence filed for Chapter 11, a Reuters article cited a McKinsey & Company study that predicts that the cost of lithium-ion batteries used in EVs could drop by more than 70% by 2025 due to the rising cost of oil, stricter fuel economy regulations, and technology borrowed from the likes of Apple. This means a complete battery pack could drop from between $500 and $600 per kilowatt hour to about $200 by 2020 and $160 by 2025. This falls close to a prior US Advanced Battery Consortium prediction that the cost of lithium-ion batteries would need to reach $150/kWh for sales to pick up in the mass market.

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Photo by Pinkyracer, used under a Creative Commons license.

John MacAyeal

John MacAyeal has worked at Hoover's since the era of Hawaiian shirts and Y2K angst (aka the late 90s). Now he's surprised to have survived into this time of skinny jeans and 2012 angst.

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