Why Obama is putting so much stock in battery technology

China, Korea, Japan, and India are today's dominant producers of lithium-ion batteries for cell phones and personal appliances. They have a running start. China is currently leading the world in the market for electric-only vehicles, according to Pike Research.

"Are we playing catch-up with Asian nations in this battery race? Yes, we are," says Ann Marie Sastry, professor of mechanical engineering at the University of Michigan and CEO of Sakti3, a battery startup company. "Sure, someone can always say it's stupid to pour billions into batteries when all these other countries are ahead of us. But it's also the price we have to pay to even get into the game."

Next two years crucial

The next two years will be crucial for the US industry, analysts say. By 2012, all the battery plants are slated be cranking out systems for cars. But will there be enough battery demand from automakers?

The danger, says Dave Hurst, another Pike Research senior analyst, is that federal funding might dry up before the domestic battery industry is on firm footing.

"We're seeing a big backlash, politically, from bailouts," he says. "So if we start seeing future funding dry up, that's going to be a problem for the industry in the longer run – after 2012, when you start to see a shakeout from battery plants bought or sold or, worst case, closing."

Pike Research estimates that global sales of plug-in vehicles will reach 1,081,000 by 2015 – with one-quarter of that total, or about 285,000 vehicles, in the US. That's about the right amount to support all the battery factories in the US – except for one thing. Many of those vehicles – such as the plug-in Prius –will get their batteries from overseas manufacturers.

That means there may not be quite enough demand to support all the US battery suppliers by 2015 – and definitely not enough demand by 2012, when most are slated to be in full production, Pike Research says.

Frost and Sullivan's Mr. Sapru offers a different assessment. He sees global demand for plug-in vehicles growing 127 percent annually through 2015, to about 756,000 vehicles a year. The US portion could be as much as half of that – although the market could be much larger depending on the strength of economic rebound and gasoline prices, he says.

"Obama coming to Michigan is about him bearing witness to the bud of an industry that could one day be a really good engine in our economy, if it is cultivated, fertilized, and nurtured," says Robert Kruse, former director of global vehicle engineering for hybrids, electric vehicles, and batteries for General Motors, and now principal of EV Consulting in Detroit.

Though the US battery industry will have to battle for primacy in first-generation new-battery technology, the long term is bright, he says. It's crucial that third- and fourth-generation battery technology be nurtured in the US – just as China, Japan, and Korea have done with borrowed US lithium-ion technology.

"What Obama has done was absolutely necessary for the US automotive industry to survive and grow," he says. "Now it's poised, with electrification, to grow into something very substantial – but only if the government looks long term. That's where we have to put our money."

Related:

• Will new charging stations spark electric car sales?
• Batteries help recharge the economy
• Can Detroit go green?

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