Are EV Dreams Going Up In Smoke?

by: John Petersen

Yesterday Mitsubishi Motors (OTCPK:MMTOF) issued two critical press releases on safety problems with the lithium-ion battery packs for its electric drive vehicles.

The first press release disclosed the March 21st discovery of a lithium-ion battery pack failure in an Outlander PHEV that was being prepared for delivery to a customer. One of the battery's eighty cells apparently overheated after charging and melted adjacent cells, destroying one of the vehicle's three battery modules.

The accompanying notice to 4,000 Outlander owners said:

"Mitsubishi Motors suggests that Outlander PHEV drivers refrain from using external charging or Charge Mode until the cause is found. In addition, dealers will be contacting Outlander PHEV customers regarding use of their vehicle as well as responding to customer inquiries."

The second press release disclosed a March 18th fire at Mitsubishi's Mizushima plant where a lithium-ion battery pack for an i-MiEV overheated in the battery inspection room and caught fire an hour later.

The accompanying notice to 68 i-MiEV owners said:

"MMC will contact its fleet customers with vehicles that contain the same drive battery packs to explain the situation and also check their vehicles."

InsideEVs subsequently reported that Lithium Energy Japan, a joint venture between Mitsubishi Motors, Mitsubishi Corporation (OTCPK:MSBHF) and GS-Yuasa (OTC:GYUAF), manufactured both battery packs. Earlier today, the New York Times reported that Lithium Energy Japan's large format automotive batteries use lithium manganese oxide chemistry, which is allegedly much safer than the lithium cobalt oxide batteries from a different GS Yuasa factory that recently made headlines in connection with a pair of 787 Dreamliner incidents that grounded the Boeing fleet.

Some might disagree, but I think an electric car that the owner can't charge isn't much more useful than an airplane that the owner can't fly.

I can't imagine what it feels like for a first tier automaker like Mitsubishi to tell its customers "we have a problem but we don't have a solution, so don't use the plug till we get back to you."

The unfortunate reality is that lithium-ion batteries were not ready for prime time four years ago and they're not ready for prime time today.

In previous articles I've provided a wealth of links to authoritative documents that describe the safety challenges of lithium-ion batteries in exhaustive detail. One of my all time favorites is an unpublished "pre-decisional draft" of a DOE report titled National Battery Collaborative (NBC) Roadmap, December 9, 2008, a high-level policy analysis that discusses the merits, risks and expected costs of an eight-year initiative to foster the development and facilitate the commercialization of Li-ion batteries. The simple summary for ideologues who won't make the time to study the roadmap in detail is:

  • Battery manufacturing is a national security issue and America cannot rely on imports for this fundamental need;
  • Catching up with Asia is not enough and America must become the global leader in energy storage technology;
  • The best available lithium-ion battery chemistries are not robust or stable enough to power America's energy future;
  • The best available battery manufacturing technologies are too expensive for a mass-market product;
  • Current material supply chains are not reliable enough to protect America's national security interests;
  • Lithium-ion batteries cannot become commercially viable without a massive government funded effort to advance the state of the art in battery manufacturing and lithium-ion chemistry through two generations over the next decade;
  • The activity we've seen over the last few years is merely a prelude to the main event;
  • The major expected reductions in lithium-ion battery costs will arise from generational improvements in manufacturing processes and battery chemistry, not from economies of scale associated with current technology;
  • Substantially all of the recently announced plans to build limited numbers of PHEVs and EVs for sale into "entry markets" like specialty vehicles, state fleets, city busses, utility fleets, USPS vehicles, private delivery fleets and the military are essential steps in the R&D process that allow manufacturers to validate the technical potential of their products prior to full scale commercial roll-out; and
  • Commercialization of lithium-ion batteries for the mass markets cannot occur unless and until all essential R&D work is successfully completed.

There's been a lot of talk about improving lithium-ion battery safety over the last four years, but progress toward that elusive goal has been very limited. Global battery manufacturers are still using the same materials, the same manufacturing methods and the same chemistries to make slightly improved versions of the same products.

The secret sauce may change, but the hamburger doesn't.

No manufacturer of electric drive vehicles is immune to the kind of devastating battery defects that are currently bedeviling Mitsubishi. It could just as easily happen to General Motors (NYSE:GM), Ford (NYSE:F), Nissan (OTCPK:NSANY) or even the mighty Tesla Motors (NASDAQ:TSLA). While the big boys would no doubt survive the rocky road, niche players with feeble balance sheets who use massive quantities of commodity grade cells might have a tougher time adjusting to the challenge.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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