As our free white paper Who is Winning in Traction Batteries and Why calculates, lithium iron phosphate LFP cathodes are favoured by more and more lithium-ion battery manufacturers because of a perception of cost, temperature range and inherent safety.
Lithium polymer construction - whatever the cathode chemistry - is also taking market share because it can have lightweight plastic casing and tolerate high pressure and it is highly unlikely to leak. The flat prismatic/ pouch type of cell construction is increasingly favoured because it is felt that it can give higher energy density and faster charge and discharge. There is a trend to vertical integration - one manufacturer making cells, modules and battery packs so it can keep cost down and control quality throughout.
The right potion?
However, some battery manufacturers are having success without ticking all those boxes. For example Ener1 subsidiary EnerDel only ticks the last two boxes, shunning LFP and lithium polymer for the options with potentially higher energy density but still avoiding the price hikes and sometimes danger of high cobalt cathodes. EnerDel choices are shown below.
Indeed, EnerDel is working on lithium titanate anodes that can help with fast charging and its affordable manganese oxide LMO and spinel LMS cathodes operate without preheating even at minus ten degrees centigrade and have a rather high top temperature at 55 degrees. It is in good company because the three current leaders in lithium traction batteries Automotive Energy Supply AESC (NEC/Nissan joint venture), LGChem and Panasonic also use LMO or LMS, for all or part of their output.
Broad approach in the past
While nowhere near achieving the commercial success and billion dollar investment intensity of the leaders in traction batteries such as Panasonic, EnerDel is not in the drip feed, no major customer situation of most of the 100 or so lithium traction battery manufacturers in world. It works with Nissan, Mazda, Think and Humvee for example, though Nissan mainly sources from its own battery joint venture. Ener1, Inc. has agreed to invest approximately $18 million to gain 31% of Think, which should concentrate minds when they are choosing a source of batteries.
Nor does EnerDel confine itself to traction batteries, preferring something of a scattergun approach to marketing up to now, from Toro push lawnmowers to Hyundai Heavy Industries large buses, to name two recent successes, military, medical and taking an interest in grid storage.
Parent Ener1 signed a memorandum of understanding with the Federal Grid Company of Russia to develop energy storage systems this year. EnerDel batteries have recently been chosen for smart grid projects in the U.S. and Japan. Fifteen of the buses are planned for three routes in Seoul this November. They have a range of 110 kilometers (68 miles) and a top speed of 100 km/h (62 miles per hour). Seoul alone wants to replace half of its 7,000+ fleet with electric models by 2020.
Source: Hyundai Heavy Industries
Pure electric on road vehicles
In traction batteries, EnerDel successes seem to be mainly in pure electric vehicles where energy density is paramount. For example, with Volvo, EnerDel's role is to provide the large format, lithium-ion battery packs for the planned Volvo C30 EV. With this 24 kWh battery, the C30 EV is able to reach top speeds of 130 km (about 81 mph) and is expected to be able to travel 120 to 150 km (75-90 miles) typical of most electric cars planned for the next three years.
However, Volvo is now a Chinese company and its relative autonomy within Geely of China may not endure. On May 27, Ener1 agreed to joint-ventures with Wanxiang, the largest auto parts supplier to the Chinese car industry with the deal expected to close end of September 2010.
No room in the middle
The management theory pioneered by Boston Consulting Group shows that, from cars to crushed limestone, there is a V curve of sustainable profitability with sales volume. With a new industry, having rapid market growth, the V curve is shallow but as the market matures, the V curve steepens. For example, with cars, that meant that Ferrari continued to prosper selling high priced collectible cars in small numbers and Toyota continued to prosper as it gained highest volume.
As independent entities, there was no place for Volvo, SAAB, Jaguar and a host of others caught in the middle. In traction batteries the V curve is very shallow today. With huge development and production line costs, that means almost everyone loses money at this stage. As the V curve steepens in future, will EnerDel join Samsung, Panasonic and LG etc in being biggest, with the greatest economy of scale or will it become a niche player? Or will it be caught in the maelstrom that will occur in the middle?
It is possible for a large company to be created by dominating many small niches. There is nothing to stop a niche player in batteries behaving like, say, ITW or 3M do in other industrial sectors. It could create a multibillion dollar traction battery business by dominating a host of market niches. As a discipline, 3M staff are asked to describe each unique business proposition in one sentence. Try that for battery niches.
This year, Chairman and CEO of Ener1 Charles Gassenheimer announced, ".....Ener1 is focusing on programs where it can maximize the return on its capital investment. Ener1 is more aggressively pursuing higher margin opportunities in light-duty fleets, heavy-duty buses, military and grid energy storage - target markets where we believe Ener1 also has an edge, either with proprietary cell and systems technology or working alongside strategic partners Think and Wanxiang." This would seem to be wise: bidding for the highest volume commodity car orders would not.
Find a friendly gorilla
One thing you can do if you do not have those billions of dollars to put on the table but seek to be one of the largest is to form alliances and this is happening at a frenetic pace in the traction battery industry. Ener1 has chosen Itochu Corporation, a massive Japanese conglomerate with hundreds of subsidiaries and investments and one of the largest trading companies in the world. Itochu has a five percent stake in its EnerDel subsidiary.
Completing the circle, Itochu is partnered with Think, for marketing and distribution of the Think City electric vehicles and EV drive systems in Asia. For instance it has organised a trial for Japan Post. In July, a new, fully integrated electric drive train developed by Think, and powered by an EnerDel battery system was delivered to Japan Post via Zero Sports.
Zero Sports of Japan has been selected by Japan Post as one of the conversion partners for delivering vehicles as part of a comprehensive on-road testing program which has been fast-tracked by the Japan Postal Service to electrify their fleet of 22,000 delivery vehicles. The Japan Postal Service is currently converting 25 percent of its fleet of combustion engine vehicles to electric drive as part of a government push to accelerate market adoption and infrastructure development for electric drive vehicles. It is anticipated that federal fleets across the world will be soon to follow their example.
Useful introductions and collaboration
EnerDel's Itochu connection has also facilitated a pilot project in the city of Tsukuba, Japan, The project uses EnerDel batteries to power vehicles in a car sharing program, as well as the grid, and a battery-swapping system will be used to recycle and reuse the batteries where needed. Itochu-owned convenience chain Family Mart will be involved in the project as the interface to the driver. A driver can charge up a vehicle outside the store, and from the solar panels on the store's roof. Drivers can even exchange carbon credits earned with goods in the store. Both Think and Mazda electric vehicles will be used in this pilot.
These are useful introductions but not a commitment to match the investment of the leaders in traction batteries. EnerDel needs to be crystal clear about what its strengths will be and play to those strengths. IDTechEx considers it unlikely that EnerDel can successfully meet the battery leaders head on even with the backing of Itochu.
Volume is an East Asian game
Most of the largest electric vehicle manufacturers are and will remain in East Asia, the largest market, and their traction battery suppliers will be subsidiaries, local alliances or local companies in the main. The East Asian companies that are the global leaders in traction batteries are investing several billion dollars over 20 years - not a timescale with which Western investors are familiar (beyond Warren Buffet).
For example, in just the latest round of investment, LGChem is putting $1.25 billion on the table. The Chinese are said to be investing $2.5 billion in traction batteries by 2011. The Dow Kokam joint venture is investing "only" $600 million initially.
EnerDel has formidable backing
In 2008, Ener1, Inc. acquired an 83% interest in Enertech International, one of South Korea's leading lithium-ion battery cell producers. In January 2010, EnerDel announced it will invest $237 million in a new battery manufacturing plant near its Indianapolis headquarters.
State and local economic development incentives for this total $69.9 Million. Parent Ener1, Inc. has recently agreed to sell $55 million of senior unsecured notes, together with shares of common stock and warrants, to certain investment funds and $10 million in senior convertible notes to Itochu. This follows a $65 million investment in EnerDel from principal shareholder Ener1 Group in June of this year, and a $20 million investment from Itochu Corporation in December, 2009. Ener1 will use these funds along with its grant from the United States Department of Energy under the American Recovery and Reinvestment Act, for general operating expenditures and to help pursue its intended manufacturing plans to install 260 MW, or capacity for 11,000 electric vehicle battery packs, at its three Indianapolis facilities. All this constitutes considerable firepower - for a niche player.
"Ener1 has heavily invested in expanding its global manufacturing operations in response to the anticipated demand from the grid energy storage, transportation and small cell markets, allowing us to meet our growth objectives," commented Charles Gassenheimer.
Meanwhile, Ener1 net sales were $27.0 million for the six months ended June 30, 2010, a commendable increase of 72% over net sales of $15.7 million in the prior year six month period. Net loss was $31.0 million for the six months ended June 30, 2010 compared to $20.3 million for the six months ended June 30, 2009.
As with AltairNano, Valence Technology and other traction battery companies that lack the resources, experience and East Asian government backing of the leaders in traction batteries, EnerDel's future will hugely depend on some very careful market positioning in the next few years.
The current shortage of production- ready, affordable, proven lithium traction batteries is just the calm before the storm. They have made a superb start. We wish them well.
For more read the IDTechEx report, Car Traction Batteries - the New Gold Rush 2010-2020 and Electric Vehicles in East Asia 2011-2021.
The reports Electric Vehicles 2010-2020. has a chapter on two wheelers and the traction batteries are dealt with in more detail in Electric Vehicle Traction Batteries 2010-2020.
Also attend: Future of Electric Vehicles which uniquely covers the whole electric vehicle market - land, sea, air whether hybrid or pure EV - with emphasis on future breakthroughs.