What's with all the presidential visits to battery-manufacturing plants?
President Obama's trip Thursday to just such a plant in Holland, Mich., was his fourth automotive-battery-focused stop since being elected. To riff off of President Clinton's mantra "it's the economy, stupid," it's almost as if Mr. Obama's catch phrase about what's important could be, "It's the battery, bozo."
The reason is that batteries are central to the president's election-year message that green-tech will lead America into well-paid jobs and a revived economy. But politics aside, the $2.4 billion the Obama administration has funneled to the advanced battery industry points to a tooth-and-nail struggle as the United States endeavors to catch up to Asia in making cutting-edge lithium-ion batteries for use in vehicles.
"The workers at this plant, already slated to produce batteries for the new Chevy Volt, learned the other day that they’re also going to be supplying batteries for the new electric Ford Focus as soon as this operation gears up," Obama said Thursday at the Compact Power plant in Michigan. "By 2012, the batteries will be manufactured here in Holland, Michigan. So when you buy one of these vehicles, the battery could be stamped 'Made in America' – just like the car." Last week, he visited an electric-truck plant in Kansas City, Mo.
Developing US manufacturing prowess in new batteries is vital, analysts agree. Those batteries will power next-generation electrified plug-in vehicles, which are expected to dominate auto sales within a decade, they say. The nation that dominates batteries is also likely take the lead in overall auto manufacturing.
"The Obama administration is making a concerted effort to prevent the failure of the US auto industry, and that will bolster development of the US battery industry through 2012," says John Gartner, a senior analyst at Pike Research, a Boulder, Colo., clean-tech research company. "But political shifts and market realities could remove that safety net."
Nine battery plants in the works
The huge federal investment has single-handedly vaulted the US toward becoming the globe's major supplier of advanced batteries for plug-in vehicles. Government funds have helped to finance 26 of 30 electric-vehicle battery and component plants now under construction – including nine lithium-ion battery manufacturing plants. Four of the nine are expected to be producing batteries by year's end.
By 2012, those 30 factories will have enough capacity to supply 20 percent of the world's advanced vehicle batteries, according to a new report by the US Department of Energy. That share could rise to 40 percent by 2015.
"There's no question this federal investment has given US battery manufacturers a huge push in the right direction," says Vishal Sapru, industry manager for energy and power systems for Frost & Sullivan, a market research firm. "The funding has contributed significantly to giving the US at least a chance to play in this arena."
But he and others note that the US industry will need additional research and development funding to develop technologies that are more advanced than lithium ion, if the US is to become solidly planted as a global leader in electrified vehicles.
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."