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Archive for Monday, September 13, 2010

Production of stimulus-aided automotive batteries revs up

September 13, 2010

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— The first wave of mass-produced advanced batteries funded by the Obama administration’s economic recovery program are starting to roll off assembly lines, setting the stage for new hybrid and electric vehicles.

So how will consumers respond?

Fending off criticism of the $787 billion stimulus program, the administration has cited the battery industry as one of the success stories. With new facilities coming on line in the Midwest, battery manufacturers for the advanced vehicles are providing a test case for the government’s attempt to revive the economy.

Battery maker A123 Systems Inc. planned to open a new lithium ion battery plant today in Livonia, Mich. About 300 workers, many formerly laid-off auto workers, were to join Energy Secretary Steven Chu and Michigan lawmakers to promote their production of battery cells and components. The Watertown, Mass.-based company received $249 million under the stimulus program and plans to open a second facility next year in Romulus, Mich.

Automotive supplier Johnson Controls Inc. last week started shipping batteries that were made at a Holland, Mich., facility built with the help of $299 million in federal grants. The factory expects to employ 90 workers by late next year and could produce 75,000 to 150,000 batteries a year, depending on the mix of hybrid and electric vehicles it supplies.

The Energy Department estimates that the 48 advanced battery and electric drive projects announced last year under the $2.4 billion program could lead to the production of about 75,000 batteries by next year and 500,000 batteries annually by 2014. Michigan, Indiana, Ohio and South Carolina are the states with the largest share of the projects.

Despite the fanfare, the battery industry faces many hurdles. Gas-electric hybrid vehicles represent about 1 percent of new vehicle sales, and many plug-in hybrids and battery electric cars are just entering the market.

Costs are high. The government has estimated that a battery with a 100-mile range costs about $33,000, although stimulus money could bring that down to $10,000 by the end of 2015.

The federal money has raised questions about whether the projects could create more capacity to build the electric batteries than will be met with demand for the vehicles in the future.

Mary Ann Wright, a Johnson Controls vice president, said if all of the battery companies follow through on plans to build up the industry, it could create more capacity than is needed in the short term. But she said the administration was working to address that by creating tax policies to encourage consumers to buy the vehicles and directing government fleets to adopt the technology.

Matthew Rogers, an Energy Department senior adviser who has overseen the battery grants, said the administration was “very confident” that the demand for the vehicles — both for typical consumers and commercial fleet customers — will keep the factories operating.

The companies say the federal incentives played a major role in opening the plants in the United States. Without the money, they would have turned to Asia, where the vast majority of electronic batteries and components are now built.

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