Advanced battery maker A123Systems may not have missed the boat on major automotive contracts after all. The company, which went public in September, just announced that it is launching a joint venture with the Shanghai Automotive Industry Corporation (SAIC) to supply battery components for hybrid and fully-electric vehicles.
Previously, A123’s biggest supply contract was with Chrysler, which has since all but shut down its green car programs. Yes, it had deals with the likes of Renault and BMW, but forging such a strong alliance with SAIC could give it the boost it needs to climb out of the red — and fend off investor concerns that it will continue to lose millions.
The joint venture, called Shanghai Advanced Battery Traction Systems (ATBS), may be valued at $20 million. SAIC, the third largest automaker in China, will hold the majority stake (51 percent), with A123 owning the remainder. ATBS will build components for passenger vehicles as well as heavy trucks.
The news is already have a positive impact on shareholders’ attitudes. A123’s stock leapt 10 percent yesterday. When it went public on Sept. 24, each share was priced at $20.29. It peaked at $25.77 in early October, and has since been hovering around $16 a share, a sign of investor skepticism. But it’s performance on the market yesterday and today (closing at $19.40) reflects a shift in confidence — as well as how important China will be to the growth of the green transportation sector in the U.S.
SAIC will be working with A123 to develop battery packaging, capacity and design. The latter will actually build the battery cells themselves under the ATBS name, while still selling them to SAIC. There is no exclusivity agreement in place, and no solid financial terms have been released. It is also unclear how intellectual property will be managed within the new venture.
SAIC is currently developing at least two hybrid models, and plans to launch fully electric vehicles by 2012. SAIC’s total investment in green transportation is expected to hit $930 million by the end of 2011. This sum should pique the interest of A123 competitors Johnson Controls-Saft, Panasonic and Valence.