The lithium-ion battery cell has emerged as a clear favorite with the plethora of car manufacturers who are announcing their electric ambitions. And as this demand rises, suppliers of battery technology are in a race of their own to provide high-quality, low-cost lithium-ion solutions. Several Asian firms have established dominant footholds in the industry, winning contracts with major auto companies, and they offer a formidable challenge to newer entrants:

South Korea’s LG Chem was the supplier chosen by GM to manufacturer batteries for the upcoming Volt plug-in. The newly formed CODA Automotive (based in California) has a deal in place with China’s Lishen Battery Co., and the popular (in China) BYD line of electric automobiles runs on batteries that are produced by their parent company, BYD Company Limited. Other notable Asian players include Panasonic, NEC and Sanyo Electric, all based in Japan. These companies have established reputations for reliability and their technology is tried and tested.

The Challengers

On the other side of the globe, there is a relentless drive to catch up and surpass. Helping the effort is the $2.4 billion U.S. stimulus program, a large portion of which is slotted for battery development. Ener1, a start-up from Indiana, has recently applied for a $480 million government loan in order to expand their facilities and leverage their proprietary battery technology. The company is already supplying Think Automotive, a Norwegian manufacturer, and they are in preliminary stages of agreements with the Californian carmaker Fisker. What separates their product from competitors includes the chemical coating that they apply to the lithium strips, allowing them to customize the battery performance for various needs, as well as the stacked-design of their battery cells, which their CEO refers to as a “breakthrough”.

Another large American technology company aiming to dominate the market is A123 Systems. They have an edge in that they already have battery plants in Asia and relationships amongst the supply-chain. Now, there are talks of adding new facilities to the U.S. in order to take advantage of tax incentives and geographic benefits. Batteries, which are notoriously heavy, can be expensive to ship, so moving their production close to one’s customers can help lower costs.

The Prize

Numerous smaller firms and research arms across the globe are also in the race. The allure of securing just one contract with a major electric car maker is enough for investors and engineers to pour in vast sums of money, time, and experience.

Market dynamics and product technology make for a complicated and unpredictable future. In order to sell, batteries must deliver on multiple fronts that include price, reliability, range, weight, customization, and overall life. Large auto companies also want a supplier that can deliver on large orders with few defects.

While a true battery breakthrough has not yet occurred, falling prices is an important enough factor to keep demand flowing. Whosoever captures a significant chunk of that demand will earn riches, as well as prestige.

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G

• The new Global Battery Systems Lab is located at the Warren Technical Center campus on the outskirts of Detroit. According to information coming from the company, it cost GM $25 million to construct, takes up 33,000 square feet, and employs over 1,000 engineers. The facility will operate 42 thermal chambers and 160 test channels that will expose batteries to real-world driving conditions and test the limits of their design and capacity. Included in the testing are 32 battery “cyclers” that will continuously charge and deplete battery cells for further efficiency studies. The battery headquarters will most likely be utilized by GM and its suppliers, LG Chem and Compact Power, to perfect the sort of lithium-ion batteries in the upcoming Volt and its successors.

While this new facility sounds like a definite step in the right direction to improve the technology and compete with Chinese battery heavyweights, some of the numbers don’t seem to add up. Firstly, $25 million is a very small number for a state-of-the art lab. To put it in perspective, Apple recently announced that it would be spending $1 billion on a server farm. Second, employing a thousand engineers would be very expensive – certainly exceeding the price tag that was given – and appears to be an excessive concentration in one facility. Additionally, the start date of construction was only last August and there is no word yet if more money is needed to operate and expand the center.

In the meantime, GM has plans to create a battery-focused engineering curriculum at the University of Michigan, around which they plan to construct another battery lab.

Amidst these developments, the speculation that the Volt program might be discontinued is probably going to quiet down, perhaps for good.

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Despite the financial troubles of the U.S. automaker, Patil says that he has not noticed any loss of commitment, claiming that “From GM’s side, it’s their highest priority program.”  Compact Power is a subsidiary of  LG Chem, Ltd., a South Korean battery supplier.

This statement, coming from a close supplier with supposed knowledge of GM’s future goals, provides insight that perhaps the automaker’s credibility, or even its future, is resting on the Volt.   Upper management will be pouring its resources and advertising dollars (courtesy of emergency government funds) into the car, which is scheduled to go into production at the end of 2010.

It is unclear how much success the P.U.M.A will bring GM.   However,  don’t be surprised to hear of further electric vehicle announcements  based on the design of the Volt.

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