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Electric car batteries: The new cleantech bubble?

The electric vehicle battery industry will cave in by 2017, according to a new report that predicts massive oversupply — basically too many batteries for too few cars on the road.

Published by German consulting firm Roland Berger, the report estimates that only six or seven of about 60 worldwide EV lithium-ion battery makers will survive the decade. That includes recent American upstarts like A123Systems and Valence Technologies. The field will literally be decimated.

Johnson Controls-Saft, one of the more formidable companies in the field in the U.S., claims that demand will be 62 percent behind supply by 2015 — a critical unbalance. The projected bloodbath could easily be as bad as the 2001 tech bubble, analysts say.

The Roland Berger findings have been backed up by Lux Research, which claims that global EV battery companies will be able to sell only one-third of their manufacturing capacity by 2015. “We are definitely predicting a li-ion glut coming,” the company told Earth2Tech.

There may be a silver lining, however. As battery companies go belly up, prices for the actual hybrid and electric vehicles themselves are likely to come down. Right now, batteries are the single most expensive components of cars like the Tesla Roadster and Chevy Volt. If overstocked batteries sell for cheap, automakers will be able to increase their profits and lower sticker prices. This trend could even lead to widespread adoption of plug-in cars much sooner than expected.

The Roland Berger report estimates that EV battery companies will need to bring in close to $1 billion in revenue in order to stay afloat. This is a tall order for young entrants like A123Systems, which posted a total revenue of $66.5 million in 2009.

It will be interesting to see whether any of the venture-backed companies make it. A popped bubble could leave only the corporate giants like Panasonic standing in its wake.

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