How Growing HEV Markets Will Impact Battery Manufacturing Revenues

For the last three weeks I've been writing about why rising oil prices, tightened CO2 emission standards in Europe and accelerated CAFE standards in the U.S. will combine to foster rapid implementation of hybrid electric vehicle [HEV] technology in the automotive industry and result in huge revenue increases for all automotive battery manufacturers. These articles have generated record numbers of comments and questions from readers that want a clearer understanding of what the rapidly changing demand picture means for battery investors.

While I generally try to avoid revenue forecasts because they require pricing assumptions that can be fertile ground for nit picking, I'll ask readers to bear with me because the conclusion does not depend on the initial assumptions. The bulk of the hard market data I've used in this article was graciously provided by Frost & Sullivan, a leading global consultancy and market research firm that provides best in class coverage of the energy and power systems markets.

So far, the one bright spot in the global recession has been savings at the gas pump. For every $1 decline in prevailing gas prices, nationwide spending on gasoline falls by $12 billion per month and those savings go directly to consumers. Unfortunately, the relief was short-lived and gas prices are once again rising. The following graph is based on historical oil price data downloaded from the DOE's Energy Information Administration. To give readers an idea of why I'm convinced that oil prices will stabilize around $80 over the next few months and be a primary market driver for the shift to HEVs, I've added a simple price channel overlay on the ten-year trend.




In The Obama Fast Track for HEVs, I explained that there are four basic types of HEVs:

• Micro-Hybrids stop the internal combustion engine ("ICE") when the car comes to a stop and restart the ICE on demand, but do not provide any acceleration boost to the powertrain;
• Mild Hybrids stop the ICE when the car comes to a stop, restart the ICE on demand and provide limited boost to the powertrain during acceleration;
• Full Hybrids stop the ICE when the car comes to a stop, launch the car from a stop in electric-only mode, restart the ICE when needed and provide a higher level of boost to the powertrain during acceleration; and
• Plug-in Hybrids will allow the car to operate in electric-only mode for up to 40 miles before starting an ICE to recharge the batteries.

I then explained how President Obama's decision to accelerate the effective date of Federal CAFE standards will require manufacturers to increase fuel efficiency by roughly 35% over the next seven years and eliminate fleet-wide averaging, thereby forcing each class of vehicles to carry its own weight. My conclusion was that while the accelerated CAFE rules were not an HEV mandate, they put HEVs on a regulatory fast track in the U.S.

In a follow-up article,Why Advanced Lead-Acid Batteries Will Dominate the HEV Markets, I drilled deeper into the economics of using various types of batteries in HEVs and explained how recent changes in European tailpipe CO2 emission standards would accelerate efforts to make micro-hybrid technology standard equipment. That article included the following graph from an October 2008 Frost & Sullivan presentation that explained their estimates of near-term growth in global HEV demand and showed how that growth would be divided up among micro, mild, full and plug-in hybrids.

Since the October 2008 Frost & Sullivan presentation focused on the impact of European CO2 emission standards and assumed that revised CAFE standards would not take effect until 2020, I believe global HEV demand during the forecast period will ramp up far faster than the growth rate reflected in the baseline estimates. For analytical purposes, Table 1 starts from an estimated base of 2 million units in 2009 and then increases production to 5 million units in 2010, 11 million units in 2012 and 20 million units in 2015. In order to put NiMH and Li-ion batteries in the best possible light, Table 1 uses the 2015 Frost & Sullivan market penetration percentages for all years.

Table 1	Market	2010 Increment	2012 Increment	2015 Increment
	Penetration	3 Million Units	9 Million Units	18 Million Units
Micro Hybrid	78%	2,340,000	7,020,000	14,040,000
Mild Hybrid	6%	180,000	540,000	1,080,000
Full Hybrid	15%	450,000	1,350,000	2,700,000
Plug-in Hybrid	1%	30,000	90,000	180,000
Total HEV Demand	100%	3,000,000	9,000,000	18,000,000

All currently available HEVs use beefed-up lead-acid batteries for their start-stop functions and NiMH batteries for their powertrain functions. Table 2 summarizes the incremental battery cost for each HEV type assuming a $150 premium for a more robust start-stop battery system and $800 per kWh for powertrain batteries, a value taken from the most recent DOE cost estimate for heavy-duty NiMH batteries.

Table 2	Start-Stop	Powertrain	Powertrain	Total
	Batteries	Battery Capacity	Battery Cost	Batteries
Micro Hybrid	$150		-0-	$150
Mild Hybrid	$150	0.75 kWh	$600	$750
Full Hybrid	$150	1.50 kWh	$1,200	$1,350
Plug-in Hybrid	-0-	1.00 kWh	$8,000	$8,000

Table 3 summarizes the additional expected demand for lead-acid batteries for new HEVs assuming they will only be used for start-stop applications.

Table 3	2010 Revenue	2012 Revenue	2015 Revenue
	Increment	Increment	Increment
	(millions)	(millions)	(millions)
Micro Hybrid	$351	$1,053	$2,106
Mild Hybrid	27	81	162
Full Hybrid	_68	203	405
Totals	$446	$1,337	$2,673

Table 4 summarizes the additional expected demand for NiMH and Li-ion batteries for new HEVs assuming they will be used for all powertrain applications.

Table 4	2010 Revenue	2012 Revenue	2015 Revenue
	Increment	Increment	Increment
	(millions)	(millions)	(millions)
Mild Hybrid	$108	$ 324	$ 648
Full Hybrid	540	1,620	3,240
Plug-in Hybrid	240	720	1,440
Totals	$888	$2,664	$5,328

While Tables 3 and 4 paint an optimistic demand scenario for all battery manufacturers, the unvarnished truth is that the incremental near-term demand for NiMH and Li-ion powertrain batteries cannot possibly be satisfied.

Battery manufacturing is capital intensive and it takes 3 to 4 years to build and equip a new NiMH or Li-ion battery plant. According to Frost & Sullivan, global sales of NiMH batteries for automotive powertrain applications were roughly $833 million in 2008. Of that total, $580 million (70%) represented batteries that Panasonic EV Energy, a Toyota (TM) subsidiary, made for its parent. Frost & Sullivan has also reported that total global sales of Li-ion batteries were roughly $7 billion in 2008 and substantially all of those batteries were used in non-automotive products. Notwithstanding the flurry of recent press releases about planned battery plant construction in Asia, Europe and North America, those projects cannot be completed before 2011 or 2012 and meeting the incremental automotive powertrain battery production schedule in Table 4 would require manufacturers to build new factories that are equivalent to the world's entire NiMH battery manufacturing capacity every year for the next six years.

Battery manufacturing is also raw material intensive and according to metal mining and natural resource development expert Jack Lifton there are critical production constraints on both the lanthanum that is essential for NiMH batteries and the lithium that is essential for Li-ion batteries. While supplies of both of these metals can be increased over time if enough development capital is available to mine owners, the average lead-time to expand an existing mine or bring a new mine into production is on the order of 5 to 7 years. So even if the battery manufacturing plants could be built fast enough to satisfy the anticipated near-term incremental demand for HEV batteries, the miners can't increase lanthanum and lithium production fast enough.

Automobile manufacturing is a tough business and many product development decisions are driven by legal requirements, supply chain needs and cost considerations that often transcend engineering preferences. The undeniable facts that the auto industry is being forced to come to grips with today are:

• Strict C02 tailpipe emission standards have already been adopted in Europe and must be met by 2012;
• Accelerated CAFE standards have already been adopted in the US and must be met by 2016;
• NiMH battery production cannot increase fast enough to satisfy near-term increases in HEV demand;
• While validation tests are planned, Li-ion batteries cannot currently meet market standards for HEVs;
• Li-ion battery production cannot increase fast enough to satisfy near-term increases in HEV demand;
• Lanthanum production cannot increase fast enough to satisfy near-term increases in HEV demand;
• Lithium production cannot increase fast enough to satisfy near-term increases in HEV demand; and
• Since it will be impossible to manufacture enough NiMH or Li-ion batteries to meet the regulatory deadlines, the only alternative is less expensive and more readily available lead-based batteries.

Given the crushing manufacturing capacity and material supply constraints that face both NiMH and Li-ion batteries, I believe it is virtually certain that lead-acid and lead-carbon batteries will be used as substitutes for the NiMH and Li-ion batteries that cannot be manufactured at any price. Under the circumstances, I cannot imagine a near-term future where the incremental revenue to lead-acid and lead-carbon battery manufacturers will be less than the incremental revenue to NiMH and Li-ion battery manufacturers.

I don't foresee a time in the near-term future when lead-acid batteries will supplant NiMH and Li-ion batteries in the hearts of scientists and engineers. I also believe that NiMH and Li-ion batteries are likely to retain their current status as the preferred solution for plug-in hybrids. Nevertheless, in a supply constrained environment like the one we will have to deal with for the next 5 to 7 years, automakers will make the difficult choices, use expensive NiMH and Li-ion batteries for their high value products and use cheaper lead-acid and lead-carbon batteries for their budget priced products.

As I discussed in Why Lead-Acid Batteries Will Dominate the HEV Market, the weight advantage of NiMH and Li-ion batteries in micro, mild and full hybrids is less than 75 pounds and the space savings is less than a cubic foot. While automakers pay a lot of attention to weight and space, these savings are insignificant in the context of a 3,000-pound car.

Overcoming an entrenched competitor like NiMH batteries is difficult and without looming supply constraints it would be difficult if not impossible for lead-based batteries to make inroads into the mild and full HEV markets. For the next few years, however, automakers will be forced to use lead-based batteries because there are no alternatives. My fondest hope is that after the industry has accumulated several years of experience with using lead-based batteries in budget priced HEVs, they'll conclude that the added cost of NiMH or Li-ion batteries is not justified. But even if they conclude otherwise, the benefit of using lead-based batteries as a bridge while Li-ion batteries complete the development process I described in Understanding the Development Path for Li-ion Battery Technologies is substantial.

In his book The Lost Constitution William Martin wrote, "In America we wake up in the morning, we go to work and we solve our problems." We use the tools that are readily available to us and we remain willing to adopt newer and better tools when they become readily available at reasonable prices. Sometimes, however, we give the new tools a try and then decide that the old tools are better for the job at hand. That's the way free markets work.

For most Americans and Europeans the word "shortage" has little personal meaning because we've always been able to buy the goods and services we wanted as long as we were willing to pay the price. For the first time, American and European car buyers will have to accept the fact that some HEV battery options are not going to be available at any price. It will come as a shock to many, but it will also be an increasingly common reality in a resource constrained world where 6 billion people want to earn their share of the lifestyle that 500 million of us have and take for granted.

Welcome to the age of cleantech, the sixth industrial revolution.

Fund managers are beginning to recognize the telltale signs of bubble pricing in the Li-ion battery stocks that I've been writing about for almost a year. Moreover, skeptical reports on the near-term potential of Li-ion battery developers are beginning to find their way into the mainstream financial press. The market has not yet come to grips with the inescapable conclusion that the lion's share of the revenue gains from the HEV revolution will flow to companies like Johnson Controls (JCI), Enersys (ENS), Exide (XIDE) and C&D Technologies (CHP) that have substantial existing manufacturing capacity in both Europe and the U.S., and from technology driven newcomers like Axion Power International (AXPW.OB) that can rapidly and inexpensively expand their production capacity to satisfy soaring demand from the HEV market. The window of opportunity is closing rapidly.

DISCLOSURE: Author is a former director and executive officer of Axion Power International (AXPW.OB) and holds a large long position in its stock. He also holds small long positions in Exide (XIDE) and Enersys (ENS).

Comments

[User 395761:]

John,

your best article so far...!

It will be interesting to see how HEV-developments in China, India will influence, accelerate, change this process.

One other question is: Given all this problems, constraints that battery-technologies have: Do we have to go with fuell-cells in the long run?

Jun 15 04:51 AM

[John Petersen:]

I would like to see a lot more attention given to fuel cells because batteries present such daunting materials constraints over the long term and do not have anywhere near the energy density of liquid motor fuels. But that's an industry in and to itself and one that I don't know a lot about. We're entering a new industrial phase and I can't predict what the long term solutions will be, however I'm convinced creative people will find them. Over the shorter term, batteries are going to be a critical part of the mix. For the next 5 to 10 years, I think lead-acid will continue as the industry leader. At some point Li-ion will probably take the top position and lead-acid will continue growing at a reduced rate. Over the long term, I hope they both become obsolete because of some kid in a garage.

Jun 15 05:20 AM

[Jack Lifton:]

John,

The limitations on the production of storage batteries that arise from the global production rate of lithium, lanthnaum, and lead are what I call the problem of the three "Ls." ( At least it can be named this way in English). Lanthanum and lithium production are of the same order of maginutude with lanthanum production being a little above 30,000 metric tons a year and lithium production being a little below 30,000 metric tons a year. Both lanthanum and lintium are rare metals. Lead is produced annually at the rate of 3,600,000 new metric tons a year (2008, USGS) with an additional amount being recycled yearly in the range from 1,000,000 to 2,000,000 tons. U.S. recycling of lead, the largest and most efficient in the world, is now approaching 1,000,000 tons a year almost all of which is derived from SLI batteries. There is essentially today no recycling either of lanthanum or lithium from any source. Of the three Ls the one easiest and far and away the cheapest to increase the production of, substantially, is lead. So you see any the advantage, from an availability, cost, and recyclability measurement goes to lead.

Fuel cell technology today, if durability, reliability, longevity, and efficiency are the metrics of choice (as they are in OEM automotive) uses one to three ounces of platinum per device large enough to power a small passenger carrying motor vehicle. World production of platinum is 7,000,000 ounces per year. That is the alpha and omega of why fuel cell research for transportation has come to a halt. Not even the US government is willing to continue funding such a dead-end technology as a mass producible one.

Great article, by the way. I'm beginning to think that those who nit pick your data and ignore your reasoning and conclusions are painting lipstick on a pig.

Jun 15 06:27 AM

[John Petersen:]

Jack, many thanks for confirmation that the mineral resource constraint issues are both real and substantial. As you know, my experience in mining was in the early '80s and while I know the process of permitting a mine expansion or new mine has gotten more complicated, I can't fairly speak from first hand experience.

Jun 15 07:07 AM

[ECD Fan:]

I don't know about all that. First, hybrid sales are dropping worldwide this year (and oil needs to be $150, not just $80, for robust growth to resume again, given the hybrid car pricing). Second, li-ion for hybrid vehicles is real and it does meet the "market standards" for HEVs and EVs, as Tesla has proven that li-ion can be designed to be safe and (relatively) inexpensive. Quality 18650 li-ion cells are plentiful and can be had for about $500 per kWh in volume. Lead-acid is cheap and can work for HEV/EVs as well, but it is a little heavy (on Wh/kg).

ecdfan.blogspot.com/20...

Jun 15 08:41 AM

[Alan Young:]

John, I appreciate your excellent data and understanding of the industry. If I wanted to go into the electric-car business I would probably want to follow your advice and focus on lead batteries.

But as an investor, I reach a different conclusion. Where demand is rising and supply is constrained, those who control that supply are certain to prosper. IMO the best investment opportunities-- according to your analysis-- should be in Lithium and Lanthanum suppliers.

Jun 15 08:50 AM

[Ricknplano:]

John,

Many thanks for your continuing wisdom in the area of energy storage investment opportunities.

Jun 15 08:55 AM

[John Petersen:]

EDC Fan, first, the whole auto industry is reeling this year but fully Hybrids are holding their percentage market share. Second, last week's article contains links to an unpublished DOE roadmap for Li-ion development that says they won't meet market standards for at least five to seven years and the transactions that you are accepting as proof of market readiness are merely proof that the technology is ready for the first step in a multi-year process of validation testing in "entry markets." Third, the markets that represent millions of annual vehicles are cars without plugs. I've not see a credible source yet that says PHEVs will be more than 1% to 2% of the market for the next decade and the maximum weight savings in a micro, mild or full hybrid is 77 pounds and less than a cubic foot. Before expressing grave doubt, please read the recent articles I've written that explain the facts:
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...

Alan Young, I'd have a hard time criticizing an investment in any of the mining companies that have big positions in lithium, lanthanum or lead. Unfortunately, doing analytical work on mining concerns is a whole different world from analytical work on battery companies.

That being said, you might consider Exide because they are a top-three lead-acid battery producer and a top lead recycler.

Ricknplano, I try to do my part.

Jun 15 10:15 AM

[isaac the t...:]

John,
Any idea if there are auto manufacturers currently using lead-acid batteries, or have plans to, for mild hybrids? If so, which battery companies are their suppliers?
Thanks

Jun 15 10:27 AM

[John Petersen:]

Isaac, the Frost & Sullivan slide presentation has a lot of data on the newly emerging start-stop micro-hybrids and the limited boost mild hybrids. The only one I can identify off the top of my head that has announced plans is Volvo, but they haven't identified their supplier. Right now it's primarily a European phenomenon because their CO2 standards have been in place longer. But it's a virtual certainty that the trend will rapidly migrate to the states. The download link for the complete PDF is:

awbriefing.com/present...

Jun 15 10:39 AM

[ginchinchili:]

John, you present a very convincing argument. Thanks again for sharing your understanding of this industry with us in a very well organized and coherent series of articles.

I brought this up in a comment to your last article as did at least one other reader. We hear seemingly endless anecdotes and read article after article about new battery technologies that are being explored, like Li-ion and NiMH technologies, as well as others that you ofter discuss, and their strengths and weaknesses. I'm curious, and I'm sure others would join me, about what advancements have been developed in lead acid battery technology and, more importantly, what is currently being pursued? Do you believe that lead acid battery technology has been taken as far as it can go and that it's just a matter of time before other technologies over-take it, or do industry R&D folks have something in the works?

Jun 15 11:08 AM

[John Petersen:]

Ginchinchilli, one of the problems with being a blogger is that readers join along the road and haven't necessarily read every word you've ever written. One of the wonders of Seeking Alpha is that all of my past articles are archived and available on my author's page.

seekingalpha.com/autho...

The short answer to your question is that lead-acid research basically took a 25 year nap in the mid-70's because it worked fine for its principal use of starting cars. The R&D effort started ramping up at the turn of the millennium in response to needs that didn't exist in the 70s. When they started using newer materials in lead-acid batteries the results were impressive indeed. The level of R&D in the lead acid sector is increasing across the board and while Axion and Firefly lead the pack in the US, almost everybody is adding R&D staff and making a concerted push to improve their products. Some of the articles that you might like to read are:

seekingalpha.com/artic... (reprinted in Batteries International Magazine)
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...

The nice thing about the lead acid sector is that it's small and there are only four US public companies in the pure-play class: Enersys, Exide, C&D (which is Firefly's manufacturing partner) and Axion (which has strategic partnerships with both Exide and privately held East Penn Manufacturing). If you want to expand the scope to include Asia, China Ritar Power (CRTP) seems pretty strong.

Jun 15 11:34 AM

[Road Runner:]

Good reasoning John. I can't argue with that. But, I think that only time will tell if you are right. We seem to be nearing the end of research, reasoning, and debate on this subject. Now it is up to the ever changing marketplace for how this scenario plays out.

The price of oil in 2 to 5 years, which has a huge effect on this scenario, has a wide range of possibilities. It can find a stable point around or below $100, which is my guess based on fundamental cost of extracting it, or it my shoot about $200 because of speculation and/or emerging market demand and/or a falling dollar. All 3 are unpredictable.

When the price of gas rises again to early 2008 levels, will the Chinese and Indian governments cap the price like they did in 2008, or will they let it rise? Capping the price will lead to much higher demand leading to much higher oil prices.

Will the US Government finally do the smartest thing, as per almost all economists, to curb oil use which is raise the gasoline tax? I can’t even guess on something like this.

Jun 15 11:55 AM

[John Petersen:]

Road Runner, From the 25 year oil price chart it looks like we hit an inflection point when the '97 Asian financial crisis got resolved and we've had a relentless upward march ever since. I'm nowhere near sophisticated enough to interpret short term technical charts, but this one paints a fairly clear picture of a strong upward trend that I think will continue until we hit another inflection point. Oddly enough, rapid implementation of micro and mild hybrid technology may be enough to slow the pace of oil price escalation.

The things that are not unpredictable are the regulatory limits and deadlines. While there are lots of incremental things that automakers can do to inch their way toward the standards, micro and mild HEV standardization can do somewhere between 25% and 40% of the job for them with relative ease. So I think that dynamic stays stable no matter what; unless of course the governments back down on clean air and fuel efficiency standards which seems unlikely to me.

But I agree wholeheartedly that the market will do what the market will do and while we can guess about the future, it will probably surprise most if not all of us.

Jun 15 12:04 PM

[Don Harmon:]

Great article John! Some of your readers may want to have a look at this paper for a better understanding of what is "out there" now and which choice may be better for HEV applications:

www.thermoanalytics.co...

Jun 15 03:28 PM

[John Petersen:]

Don, I appreciate the chart more than you know. It does a great job of showing the variety of factors that automakers have to consider when trying to pick a battery to do a specific job. I wish it included information on lead-carbon, but I know that Axion hasn't published detailed specifications yet and I'm not entirely how much detail is available on the Furukawa ultrabattery.

The thing I found most interesting is that the chart still classifies NiMH as prototype rather than production. I would have thought that with as much history as we now have in the Prius NiMH would meet their standards for a production product.

Sometimes I fear that readers believe I have a visceral hatred of Li-ion, which really isn't the case. I do, however, believe the developers have done a terrible job of managing expectations on timing and giving investors a rational view of where a product is along the development path.

Jun 15 05:12 PM

[John Petersen:]

Another helpful link for people who want to really dig down into the meat of the technology is the "FreedomCAR Energy Storge System Performance Goals for Power-Assist Hybrid Electric Vehicles (November 2002)"

www.uscar.org/commands...

When going back and forth between the two documents, readers need to remember that the Thermoanalytics chart talks about deep discharge cycle life and the FreedomCAR standards focus on very shallow depth of discharge. With most batteries, frequent shallow discharge is much easier on the device than deep discharge.

Jun 15 05:18 PM

[Don Harmon:]

John - I was also struck by the NiMH categorized as Prototype? Also there was no mention of LiFePO4 which leads me to believe the paper is old, but still worth reading. I stress LiFePO4 because it is a different animal than Li-ion although in the same family. Still some of these old studies like the one I found the other day can still be very illuminating as the background material is still quite applicable. See this paper for those who haven't yet:

www.atp.nist.gov/eao/w...

Jun 15 05:47 PM

[Advill:]

Oooohhhh...Hold your horses!.

If you talk to the oilmen they will tell you that:

New fields will be at hand in South Atlantic, deep donuts hole in the Gulf of Mexico with a mamuth field, and Mexico shoreland which is one of the less explored lands in earth (because internal political reasons), in addition to that there are many new techniques that allows a huge increase in already exploited fields (injection of nitrogen, lateral and horizontal perforation etc.)...Arabia has been without exploration for decades...

If you talk to the guys in Athabasca fields they say they will have nuclear power to reduce cost and environment costs (see hyperion.com)

If you talk to car guys they will tell you that ICE engine has a lot of improvements that will allow cars to get CAFE in a "european style" (wait and see FIat cars in US.), not to mention DIESEL that wonderful fuel that AMerica hates.

If you talk to government people they say...well they says so many things but a few of them are:

Diesel in a mix as in EUrope will create a new comfort level for people foar at least 15 years.

A new ($$$$) grid system will be require to HEV and EV in the future, of course they talk about clean revolution and all that but many thigs has to happen before (and time to build it is not peanuts) ...they say many other things, lets stop here.

The Biofuels guys says they will take the increase in fuel demand keeping flat the oil import bill, alcohol is nowdays a better alternative low carbon alternative to HEV (ask the brazilians)...and compresed air cars (ask the indians)....and the fuel cell is coming strongly in a few years (ask germans)

And we are talking here about a lead technology that is not in the market yet? or about Lithium batts that costs as much as the car itself?....and the other batt alternatives?

Cmon...I am an investor in 3 batteries companies because they will have good area of expantion but they will not be the panacea of the century ...at least in transportation.

Diesel, biofuels and improved ICE will take take the lead in the meantime, after that we will see.

Regards.

Jun 15 06:07 PM

[Jack Lifton:]

Toyota has just announced that it has achieved a production rate for the Prius power train and for the NiMH battery used in that power train of 50,000 units a month! Is that a prototype production level? A prototype production level passed off as mass production is the battery production for the Tesla. Let's everyone get our terminology correct please, or we will get to where we are reading that "lithium ion battery production is being kept at a very low level in order to fool the proponents of other mass produced battery technologies into thinking that lithium ion batteries are not ready for mass production."

Jun 15 06:45 PM

[Don Harmon:]

Advil, no offense but you are taking an approach that says don't think any further than 15 years out - we can do just fine depending on existing resources and tweaks of ICE vehicles. That may or may not be true but for the sake of your argument we'll give you one in your column, OK.

I think the vast majority of "green conscious" people who are thinking of the kind of planet we will be leaving our children would take a bit more of a longer term mindset? As John puts it we are entering the 6th industrial revolution - the "cleantech" one which will depend on all nations together to form a global concensus and a united effort to reduce greenhouse gasses and Co2 emissions.

Sure, we can muddle through with incremental improvements in oil production, nuclear energy, and maybe clean burning coal? But this is NOT a blueprint for sustainability, and being intellligent beings, one hopes that even the teaming masses can grasp this?

If not then we will start to see the kinds of things happen that up to now are only conceived of in apocalypse movies or Al Gore slide presentations.

I am going to go hug my polar bear now!

Jun 15 06:51 PM

[Don Harmon:]

Lets Get Ready To Rummmmmmmble! Here's some interesting food for an article that might just tie into all this?

The Chinese are diversifying out of their US Treasuries and dollar holdings. Are they buying Gold bullion ?- NO they are buying Copper and lots of other rare metals at commodity prices right now because these metals will be the catalyst for the new Hybrid car revolution.

One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.

Just a few things to ponder folks. Read the whole article here:
www.telegraph.co.uk/fi...

Jun 15 07:17 PM

[TinyTim:]

John-
another interesting article.
Living in the Sunbelt, but originally from the Rustbelt, I can't help wondering about the affect of cold temps on HEV power train batteries. I'm fairly confident current HEV's have to make allowances for batteries to warm up. I've had my share of experiences with frozen starter batteries.

I notice you have refined your definitions of the basic HEV types.

I reviewed the F&S report after your last article and would be reluctant to hang my hat on their research, as esteemed as they are. Your main thesis seems to be severe production shortages for all HEV battery types except lead in the short term; forcing adaption of lead for the longer term. I'm sure it's occurred to you that this scenario could wreak havoc with lead battery producers who make large capital expenditures to expand capacity for the short term, only to have some other technology substituted.

What I foresee is similar to the "sticker shock" days of the 80's. People will hang onto their older cars longer, especially if they're already compacts with good gas mileage. With the economic slowdown, we're already seeing how elastic the demand for new cars is. This may significantly impact the near-term crunch for power train batteries you foresee, allowing non-lead substitutes to gain capacity.

"While automakers pay a lot of attention to weight and space, these savings are insignificant in the context of a 3,000-pound car."
Tell that to my silly compact spare tire.

Lastly, thanks Don for all the interesting and useful extra info in the links.

Jun 15 09:22 PM

[Mayascribe:]

Don: The Chinese are not buying gold, yet (as far as we can tell). They are waiting for the IMF to dump some. Many articles here on SA and elsewhere suggest this senario. Further, China now is the number one gold producer in the world. Their recent announcement that they have upped their gold holdings by five fold give forth this evidence to be held true. Agreed with you am I about using their American dollars to not only buy copper, and various other base and rare earth metals (as well as Australian companies producing such rare earth metals), but also--it can be viewed as an obvious attempt to diverisify out of American dollars.

I seriously doubt that there is anything "covert" going on here. After all, Tres. Geitner just visited China for this very reason.

Right now, China feels they have the best hand in the global economics poker game. Yet, they are between somewhat worried and frenzied that the USA could pull out that inflate-away-the-debt ace up its sleeve.

Surely, China is after all these rare earth and base metals for a reason; it's just not only about cars, it's also about the future of their country's electric power grid. China has awarded huge contracts to Yingli Green Energy and Suntech Power, as well as other smaller solar companies. Further, they are agressively going after wind power in a way I only wish the USA would do.

The lesson I've learned from John, is that there is so much more to batteries than just they automotive slant. The small sampling of companies in the USA that have the ability upscale battery production lends to a wildly opportunistic investing phenomena.

The catch is that it will take some time. Given that one of John's favorites, Exide (XIDE) had a terrible last quarter--leading to over a 40% drop in their stock--means to me that either people think that they can get back into batteries at a later date, or, that they are grossly uninformed about the absolute neccessity of the development of batteries that are competitive worldwide--akin near a national security endeavor.

I would say as a student of this investment game, that Exide will not take off right away. Obama will likely give a jolt with his Uncle Sam chuck-a-bucks. But that may fade, as I wrote sometime ago here, that batteries are the last thing you put into anything you build. Patience is required. I believe that the lead acid battery makers will be a "multibagger" in the four to five year term.

To me, Exide is a screaming buy right now.

Cheers!

Jun 15 09:49 PM

[Mayascribe:]

John: Last week it was me pushing toward 200 comments. Not you! But you got them anyway. Though I've slowed down reading SA articles--I used to read pretty much every one every day--I've never ever seen any article come near topping 200 comments! Well done!

Another fine article.

Jun 15 09:56 PM

[Mayascribe:]

FYI, John: A while back I wrote that Exide was paying a remarkable 27% on their corporate bonds. That's now down to 16.5%, so my broker tells me. Still think owning the common stock is the way to go.

Jun 15 10:05 PM

[Mayascribe:]

Don: One more thing (or, another senario). The IMF may soon be offering bonds rather than dumping the gold. Likely it would be prudent for the Chinese to "wash" their T-bills through buying these bonds.

Jun 15 10:08 PM

[Don Harmon:]

Maya, I agree here and while I can see John's scenario leaning toward advanced lead acid I have a visceral feeling that Americans will not follow the trend here and accept lead acid despite the "advancements" that it has made or what the marketing dept. decides to call it.

Sorry, but @ 60 yrs. of watching how this culture works I can't get my head around the consumer market in the U.S. suddenly having a "deja-vu" revelation and opening their wallets for new technology cars with old technology batteries - despite their incremental advantages, supply chain availability, or ability to ramp up production worldwide.

In this age of Ipods and I-phones, Americans like their Japanese counterparts, want to have the latest technology and since all their consumer electronics have been powered by Lithium for the last half century they will embrace Lithium for new hybrid or PHEV vehicles no matter what you call them. If you put Lead in these cars you will kill the market for them. A few old guys like me might buy one but you won't sell any to the young generation. Why, because Lead is OVER in their minds.

I believe all the major car companies realize this and that is why you do not see them touting "Axion Power" or "Advanced Carbon" in any future models being announced or shown at Car Shows worldwide.

I love John and I know he won't like me posting this but I would have to see some evidence that Car Companies are planning on switching from NiMh or Lithium back to Lead Acid in their PR about the new models they plan to offer by 2010?

If they plan to suddenly pull the rug out under the American consumer and flog Lead Acid they better start now to make their case in the court of public opinion. Otherwise they will surely fail across the board with any of their new car products.

Jun 15 10:22 PM

[Mayascribe:]

Okay, Don! Here's a bet! You buy 500 shares of your favorite American-based non-lead acid battery stock, and I'll buy 500 shares of Exide tomorrow, and we'll see who has the profit one year from today to fly over and buy John a Swiss beer (do the Swiss make beer?)

Jun 15 10:28 PM

[Mayascribe:]

Don: Classic case is that my nephew, who is in law school, was enabled by his parents to buy a car of his choosing. His mother wanted him to buy a Jeep, at a greatly discounted price. But no, he chose a Volkswagon, because he believes gasoline will go up in price dramatically before he exits law school. He wants that mileage over his mother's concerns for safety. He couldn't give a crap about what kind of battery the car has under its hood.

Jun 15 10:35 PM

[Mayascribe:]

Don: Since you're ready to 'Ruuuumble," have you ever watched Jay Leno...when he goes out on the street and asks "obvious" and "simple" questions? I think you way over estimate the average "informed" intelligence of the young American populace. Worldwide, the American youth education is being trounced by other developed countries, leading me to think your assumptions just may be skewed by your thoughts that all of American youth cares about lithium powered batteries. They don't.

They don't care what battery is in their I-pod or I-phone. They care about just owning one.

Jun 15 11:00 PM

[Don Harmon:]

Might as well buy John a Swiss beer then now :-)

Jun 15 11:07 PM

[Don Harmon:]

Maybe I should have substituted the Automotive PR department for the youth of America - would you buy that Mayascribe?

Jun 15 11:12 PM

[TinyTim:]

Don-

The Chinese are going Keynesian.
They're looking for an alternate to the USD as defacto reserve currency. Check out "bancor" or "unitas" on Wikipedia. These were proposals for reserve currencies based on commodity metals (including gold) at Bretton Woods. Turns out they dropped everything but gold, then Nixon dropped gold.
The Chinese have also been agitating for IMF SDR's for the same reason.
The reason of course is they hold too many USD ($1.9T)
"Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money". LOL

It all comes down to the Triffen Dilemma. The inherent conflict of interest between domestic monetary policy and international monetary policy for any reserve currency.

Since China strongly promoted the trade imbalance that created their reserves, it's hard to feel sorry. When you owe the bank a million, you have a big problem. When you owe the bank a trillion, it's them with the big problem.

If China wants to play with metals, they can more easily trade the markets. I sure hope they're not trying to corner a metal like copper. Brings back memories of the Hunt Bros and Rich Dennis with silver.

Jun 15 11:18 PM

[Mayascribe:]

John: Hate to bludgeon your column with obtuse comments, but, I remember months ago say, "This column's gone Web 2.0!" Apparently, some doggy ole dude, who tracks the English language, has proclaimed that, "Web 2.0," has now become a word!

The 1,000,000th English word!

I say to him, "Sir! How can that be one word?" How 'bout "chuck-a-bucks?"

Jun 15 11:23 PM

[John Petersen:]

WHAT FUN! I wake up and there's a pile of new comment.

Jun 16 12:19 AM

[John Petersen:]

Advill, don't read too much into my conclusions because I don't believe that batteries are the be all and end all. The best we have are to darned expensive and while I keep praying for the kind in the garage, I haven't seen any signs of him yet. So the best we can hope for is to use all the tools in the box and do the best we can with those tools.

I have no question that the solution will require a bit of everything, but the days of the easy solutions are over. The easy giant oil fields have been discovered and the undeveloped fields that remain are a technical and logistical nightmare, but anything can happen for a price. You already know that I'm a huge fan of diesel and think the American prejudice with respect to that fuel is shortsighted. I have a large interest in a little OTC biodiesel company but have a hard time with the ethics of using food for fuel. I also live about 15 miles from the neighborhood nuclear plant and have no problems with that solution. Ultimately I think the answer will be to embrace everything because the 6 billion are not going to sit quietly on the sidelines while we argue about the best choice.

Advanced lead-acid is available today, it's just a little more expensive than standard OEM equipment for starting, lighting and ignition. Lead-carbon is working its way through the system, but it's being moved by companies that don't give a damn about PR and would rather build a competitive edge.

The one thing that appears very unlikely to change is the effective dates for emission standards. Looking down the barrel of that shotgun, spending a few hundred bucks on beefier starter motors and batteries to make all cars micro hybrids and solve 25% of the problem is a real attractive business proposition. If you go back to the tables in my first article on the HEV issues, the biggest bang for the buck comes from micro-hybrid. It isn't sexy by any means but it saves an easy 6% or 7% on fuel consumption.

seekingalpha.com/artic...

It is a baby step - which is exactly what we need to be taking.

Jun 16 12:46 AM

[John Petersen:]

Jack, the same chart that showed NiMH as a "prototype" technology showed li-ion as a "laboratory" technology. If I were going to make that judgment I would promote both battery technologies by one level making NiMH "production" and li-ion "prototype." I suspect you'd do the same. Unfortunately development status doesn't count for much in the face of raw material production constraints.

Jun 16 12:51 AM

[John Petersen:]

Don, I make no claims to being green conscious and like to think of myself as the pure economic man. Waste is too expensive for us to keep doing things the way we have and the 6 billion are forcing the issue. Cutting my gas consumption is not going to impact global gasoline consumption, it's just going to leave a little more room at the table. The hard reality is our kids are not going to have it as easy and plentiful as we did and we are all going to have to learn to do more with less. Welcome to cleantech.

Jun 16 01:01 AM

[John Petersen:]

Tiny Tim, I pared the definitions down a bit, but haven't changed them from "The Obama Fast Track" piece. My premise isn't that the automakers will start with advanced lead-acid and then switch to something else. It's that they'll start with advanced lead-acid, find that it works just fine in micro and mild hybrids and decide that switching to something else isn't worth the cost. The public will scream bloody murder over a sticker shock measured in the high hundreds. Heaven knows what the response would be for a 2x or 3x sticker shock that won't necessarily do the work any better. That entrenched competitor thing is a major issue and once it starts it won't change for decades.

Jun 16 01:09 AM

[John Petersen:]

Mayascribe, one of my favorite subscription services is Stratfor because they do a great job of analyzing the relative geopolitical strengths and weaknesses of the major powers. China is out on a global buying binge because it's home to a big chunk of the 6 billion and knows that keeping the home fires burning is the only way to stay in business.

For the last couple years the glitter in the battery business has been the romantic notion of PHEVs because they makes for nice press releases and stump speeches. The reality is that tectonic changes are in the works and the first major beneficiary will be advanced lead-acid because a mass shift to micro hybrid technology makes so much sense in terms of fuel saved for dollars spent (or if you prefer emissions saved for dollars spent). As a result I'm not looking for a 4 to 5 year upward trend. When tectonic changes happen, you get monster spikes followed by an entirely new trend line.

Yesterday Exide was selling for 11% of sales, C&D was selling for 16% of sales and Enersys was selling for 46% of sales. When the market realizes that these companies are going to be leading the parade instead of watching it pass them by, I think the adjustments will be both violent and permanent.

Jun 16 01:31 AM

[John Petersen:]

Don, I'm know the cultural shift to cool in ipods and iphone G3 and feel terribly retro with my 2005 vintage Razer, but there are very few people who think of their car batteries as status symbols, particularly when the sticker difference is measured in thousands of dollars. One of my favorite quips is "if you ask an engineer whether the glass is half-full or half-empty he'll simply tell you the glass is too big for the volume of fluid." The same rules will hold for micro and mild hybrids. Start-stop and 15 second boost cycles can be handled perfectly well by advanced lead-acid and there is no sense in paying a premium price for a battery system that the application can't use. Volvo is in fact beginning to market its lead-acid based start-stop technology as a big gas saver. They're selling what the technology does, not how the technology works.

In the final analysis, the market will be driven by emission standards and consumers will be given the choice of buying a car that meets the standards or buying a pair of hiking boots. For the reasons I've already discussed, NiMH and Li-ion can't make a major contribution to the effort which leaves only one choice.

Jun 16 01:52 AM

[John Petersen:]

I believe we are at a point of paradigm shift. The automakers are staring down the double barrels of EU standards that take effect in three years and US standards that take effect in seven. The only possible way to meet the EU standards is to make micro-hybrid standard equipment. Once that development work is done by all the automakers who sell cars in Europe, they are not going to jettison the work and shift to an entirely different technology base that does not do the simple work of a micro-hybrid better. They'll prefer NiMh and Li-ion for cars with plugs and high end full hybrids. Everything else will have to go to lead-acid because there is no other choice.

Jun 16 02:07 AM

[Davewmart:]

John, what figures were used as the estimates for car production in the sources you use?
If the assumption is that there will be some sort of rebound to pre-crisis levels of production, with the US buying around 16million light vehicles a year, and commensurate figures for the rest of the world, then supplies of materials will be under greater strain than if the assumption is that vehicle sales in most of the world except the emerging markets will remain close to current levels.

Jun 16 07:27 AM

[John Petersen:]

Issaac, as a follow-up, a new greentech media report on the Axion PbC batteries contained a link to an article out of the UK saying that Mercedes plans to introduce start-stop across its entire line by 2011 and hopes to catch up with BMW.

www.autocar.co.uk/News...

I'm not sure who Mercedes battery manufacturer, but Exide supplies BMW.

The greentech media story is at:

www.greentechmedia.com.../

Jun 16 07:50 AM

[John Petersen:]

Davewmart, the Frost & Sullivan presentation was dated October 2008, when the depth of the current recession was unknown. So I expect they were looking at a continuation of the prior trend. The aggregate numbers (eyeballed from a graph on page 9) were about 26 million vehicles in Europe and 18 million in North America in 2015. Total global production was on the order of 88 million. Since every pundit has his own opinion about how long or deep the current slump will be, I think I'll avoid that morass and just suggest that adjustments up or down will be proportional.

Jun 16 08:05 AM

[battman:]

Don, I've said it before and I'll say it again, much like John said earlier, people don't care about the battery, they just care that it works. If my micro or mild hybrid does what it is expected to do, I don't care if it runs on PbC, li-ion, or hamsters on a wheel. What is important is the gas savings, which save me money, nothing else.

ps. No hamsters were harmed in the writing of this post.

Jun 16 08:54 AM

[John Petersen:]

battman, it's really tough when long term readers like you slip in little reminders of an old article that said "That knowledge, however, does not change the fact that using NiMH and Li-ion battery packs for transportation and grid support is like using 5,000 hamsters to pull a stagecoach. They may get the job done, but can we really afford to pay the price?"

seekingalpha.com/artic...

Jun 16 09:07 AM

[Jack Lifton:]

John,

I was reacting to the word "prototype," which I have been using in Detroit for many years to deflate pompous car executives.

I'd like to make some comments in the form of an educational rant:

1. In the period 1963-64 Stan Ovshinsky, the founder of what was to become Energy Conversion Devices, Inc (ENER) discovered reproducible electronic switching and memory "effects" in amorphous "alloys" of germanium, arsenic, and tellurium. I was the team member assigned by Stan to find a method of making electrical contact to thin films of the alloys, which thin films I was also responsible for producing. The rest is a chapter in the long history of the development of a technology. Recordable cds and then dvds using what had become known as "phase-change" technology hit the market around 15 years later, as I recall. These products had been licensed as "prototypes" by Energy Conversion to, I believe, Sanyo and SONY, among others. Phase change memories are NOW hitting the market MORE THAN 45 YEARS AFTER I SAW THE PHENOMENON IN A LABORATORY! The development of these mass produced devices as practical items of commerce was done, not by their discoverer or early developer, but by those electronics companies with massive revenues in place using profits from existing product lines to pay for the r&d of new products.

My point is that lithium ion batteries are still in development at this point in time. On a physical small scale basis their properties have been successfully tamed and are reproducible on a commercial, economical, scale.The problem with physical scale-up is that so far it has consisted only of making packs of reproducible small cells, and this has not managed yet to be tamed into a commercial device.

The two best modern NiMH batteries were developed not by Energy Conversion Devices (AGAIN!), the inventor of this battery type, but by Toyota-Panasonic and Ford-Sanyo IN-HOUSE!!!! These giants of profitable mass production chose to develop the technology on the run-they began producing it while they were improving it and could do so without betting their company's future on the outcome, because they maintained and also developed their traditional product lines simultaneously.

I have heard all of this promotional nonsense before. Not only in my own story of the phase change "memory," which started out in life as an electronic switch, but also in many other dead end developments ALL OF WHICH FAILED FOR LACK OF ATTENTION TO ECONOMICS.

The lithium game so far, in America, has involved the American OEM car makers letting the small r&d companies duke it out and then picking a couple of survivors and marrying them to one of the lead-acid manufacturers that has the mass production engineering skills, which will be needed in case a technology works out. The Europeans have done the same.

Everything being talked about endlessly in these pages is about betting on which of the lithium r&d houses has the flavor of the week. One week it is electrochemistry, and the next week it is anode or cathode chemistry, and once in a while it is charging time technology.

John Petersen has absolutely convinced me that the economics and politics of the "greening' of the OEM automotive industry have made the choice of lead-acid, at least in the near term, inevitable for the mass electrification of cars..

NiMH battery technology will grow until it has reached the maximum utilization possible of the yearly available supply of the rare earth metal lanthanum. I suspect that point will be reached during the next decade. Lithium ion battery development is in process, as it has been now for several decades. If the end point of that process is an economical safe durable reliable long lived automotive propulsion battery then we aren't there yet, and no one, NO ONE, can predict if or when we will be there. The existing lithium miners are hedging their bets and are not planning any increases in production anywhere near large enough to satisy the projected automotive "demand" until and unless they are capitalized specifically to do so. No company, consortium of companies, or sovereign sate has yet offered to do any such thing!!!

The market is functioning perfectly; it is the politicians who have screwed the lithium pooch. I think that they have they have set back the development of a lithium ion propusion battery by at least a decade by causing a severe dilution of the limited supply of battery r&d talent all working at cross-purposes. If dead ends were allowed to die then the talent pool available to the survivors would grow. Instead the economic ignoramuses in Washington subsidize the dead companies so that dead ends remain on the market to fester.

Jun 16 09:16 AM

[John Petersen:]

Jack, you can teach me any time at all. I suspect you've forgotten more than most ever learn and I'm delighted to have your respect.

Jun 16 10:04 AM

[Davewmart:]

A couple of comments.
John, the information that you have used to give estimates of total car production are, as you have said, based on pre-financial crisis output.
Whilst one may have varying ideas on to what extent production will pick up towards that lever, it is also clear that they would now represent very much top-end estimates, so much so that none of the major manufacturers are projecting for the immediate future anything like those figures.
Any reduction in total output would correspondingly reduce the number of hybrid cars to attain a constant proportion.
This would imply much reduced demand for batteries and improve the prospects of mines being dug, production lines started etc to utilise this more gradual build-up of needed resources.

It is also worthwhile to point out that the rare earths lithium and lantharum are not in fact particularly rare or expensive, and in fact comprise a fairly trivial proportion of total battery costs.
That does not mean, of course, that it would be easy of quick to bring lower grade resources on-line, and some of the elements in electric motors seem to be in a much more constrained position, which might render doubtful also projections for increased wind power.
Here is a post from Jim Kingsdale, who quotes Jack Lifton - who wrote in the comments on this thread:
www.istockanalyst.com/...
This seems to me nicely balanced and gives some figures which help to put into perspective both supply worries and some resources which could be brought to bear - obviously more easily with the more moderate expansion in car production compared to rip-roaring 2007.

Jun 16 10:15 AM

[John Petersen:]

Davewmart, I'll leave the natural resource numbers to Jack, but it's my understanding that lithium is a relatively modest percentage of the material cost in a li-ion battery, but lanthanum is a major percentage of the material cost in a NiMH battery.

Assuming that the global economy will remain weak for the next three to seven years, which many are willing to do, wouldn't you expect automakers to do everything in their power to reduce the cost of their products? If so, that's just one more reason to abandon the folly of expensive batteries in mild and micro hybrids that can't possibly use those batteries to their full capabilities.

Back in the early '90s, I paid $400 each to put Z rated tires on my Acura NSX because the car needed the extreme performance characteristics. When it came to my wife's car, I stepped down to good all-weather radials because they were all the car could use. Mercedes, BMW, Volvo and the other European manufacturers will not put more battery power in their start-stop vehicles than the electric systems can use. They will also not put an experimental technology in mainline products that they have to warranty.

Jun 16 10:40 AM

[Advill:]

Don:

You will not find people more upset and worry about the trend for next 100 years than me, as enginner i believe that resources provided by Science and Technology are at this point of human existence the only way to handle this particle of dust floating in the darkness.

But ...we are talking about business here, not intentions or futurology, that is why as Petersen says the solution will be multifactorial and gradual.

My point related to John s article is " If you think carmakers are planning a shift in the kind of cars they produce that is wrong", the EV and PHEV needs electric energy that must be deliver to the consumer charging points....right now this grid is not build yet, if you force by an act of law carmakers to produce let say 40% (4 million units) cars per year in HEV..THERE IS NO WAY TO KEEP THEM MOVING or you will have coal plants running like hell and cables red hot transmitting.

I have been an investor in Valence (VLNC) for more than 10 years, ITS FRUSTRATING they were unable to deliver a product good enough in a price level to mass market....period

I have Exide (XIDE) I consider it a good future investment (hopefully Mayascribe!!) but for me is a retail investment.

And I have Axion Power (AXPW) because i made an act of faith after reading many articles from John.

So, don t tell me about what "future" is after having Valence and Verenium (VRNM), both "future" companies. I have the same hopes you have but i define what is in the middle for that future and my conclusion is that automakers will keep ICE as long as they can improving what is needed but do not expect a revolutionary change in 10 years.

By the way...Do you know why polar bears can not be moved to south pole?

Regards


On Jun 15 06:51 PM Don Harmon wrote:

> Advil, no offense but you are taking an approach that says don't
> think any further than 15 years out - we can do just fine depending
> on existing resources and tweaks of ICE vehicles. That may or may
> not be true but for the sake of your argument we'll give you one
> in your column, OK.
>
> I think the vast majority of "green conscious" people who are thinking
> of the kind of planet we will be leaving our children would take
> a bit more of a longer term mindset? As John puts it we are entering
> the 6th industrial revolution - the "cleantech" one which will depend
> on all nations together to form a global concensus and a united effort
> to reduce greenhouse gasses and Co2 emissions.
>
> Sure, we can muddle through with incremental improvements in oil
> production, nuclear energy, and maybe clean burning coal? But this
> is NOT a blueprint for sustainability, and being intellligent beings,
> one hopes that even the teaming masses can grasp this?
>
> If not then we will start to see the kinds of things happen that
> up to now are only conceived of in apocalypse movies or Al Gore slide
> presentations.
>
> I am going to go hug my polar bear now!
>
>

Jun 16 11:24 AM

[Davewmart:]

John, you will find figures for the cost and use of lanthanum in the link I provided-briefly, you need around 12kg for an HEV, and 20kg for a plug in, at prices of around $13/kg. - lazy typing on my part, lithium cost are indeed fairly trivial, but lanthanum is a considerable although not overwhelming part of NiMH battery costs.

Although I agree with you that lead acid could do the job for light hybrids, my difficulty with the idea is simply that no-one seems to be going that way.
See for instance Mercedes engineering here:
www.greencarcongress.c...
It seems safe to say that this is intended to be the basis for all future Mercedes, as designing the system is expensive and it would need substantial redesign to use lead acid due to the very different performance characteristics, and to a lesser extent NiMH.
So if manufacturers are to switch to lead acid, they would need to switch their design effort, which is not cheap and takes a number of years, perhaps not greatly less than building new production lines for lithium or NiMH batteries, although new mines take longer.
Under those circumstances if Lanthanum or lithium do go into short supply, then the greatest effects would be felt by full HEVs or plug-ins, as paying extra for the modest amounts of materials used in, for instance, the Mercedes 0.8kwh system is obviously a fraction of that for a 12-20kwh system, and increases in cost could be absorbed much more readily, whereas the full hybrid and plug in markets would tank if costs rose greatly, thereby freeing a lot of production capacity for weak hybrids.
The 1.1 million batteries Toyota intends to have on line in 2010 would, for instance, power around 5 million weak hybrids at that rate.

Although lithium batteries are at a relatively early state of technological readiness for the car market, it should also be noted that ensuring acceptability is a lot easier for some lithium iron technologies, as they basically don't go bang as lithium cobalt does, and have far greater charge and discharge abilities than many competing technologies, so that even if they only survive for less cycles than had been hoped they would be doing pretty well.

From the information we have available then it seems to me that for automative use we are going to see the use of NiMH batteries and lithium, as that is what the auto companies are gearing up for, and the models they have in development.
If supply constraints do hit, then a lot of capacity is likely to be switched from full hybrids and plug-ins to weaker hybrids, and switching to cheaper lead acid would take some time.

For the time being then the biggest uses of lead acid in the West would seem to be in stationary applications, although that may change with time.

Jun 16 11:28 AM

[Advill:]

John:
My point is... (talking of investments in companies that can be beneficiaries of trend changes)....Let say that European Union or US government decides to give 3,000 dollars to the bottom line of car companies for each car that complies with certain emission levels... I can bet the little finger of my left hand that many different solutions will be pushed not only HEV or EVs.

We are investors no Greenpeace zealots and looking for the next winner(s) is the idea of Seeking Alpha blog and their readers (I assume).

Regards


On Jun 16 12:46 AM John Petersen wrote:

> Advill, don't read too much into my conclusions because I don't believe
> that batteries are the be all and end all. The best we have are to
> darned expensive and while I keep praying for the kind in the garage,
> I haven't seen any signs of him yet. So the best we can hope for
> is to use all the tools in the box and do the best we can with those
> tools.
>
> I have no question that the solution will require a bit of everything,
> but the days of the easy solutions are over. The easy giant oil fields
> have been discovered and the undeveloped fields that remain are a
> technical and logistical nightmare, but anything can happen for a
> price. You already know that I'm a huge fan of diesel and think the
> American prejudice with respect to that fuel is shortsighted. I have
> a large interest in a little OTC biodiesel company but have a hard
> time with the ethics of using food for fuel. I also live about 15
> miles from the neighborhood nuclear plant and have no problems with
> that solution. Ultimately I think the answer will be to embrace everything
> because the 6 billion are not going to sit quietly on the sidelines
> while we argue about the best choice.
>
> Advanced lead-acid is available today, it's just a little more expensive
> than standard OEM equipment for starting, lighting and ignition.
> Lead-carbon is working its way through the system, but it's being
> moved by companies that don't give a damn about PR and would rather
> build a competitive edge.
>
> The one thing that appears very unlikely to change is the effective
> dates for emission standards. Looking down the barrel of that shotgun,
> spending a few hundred bucks on beefier starter motors and batteries
> to make all cars micro hybrids and solve 25% of the problem is a
> real attractive business proposition. If you go back to the tables
> in my first article on the HEV issues, the biggest bang for the buck
> comes from micro-hybrid. It isn't sexy by any means but it saves
> an easy 6% or 7% on fuel consumption.
>
> seekingalpha.com/artic...
>
>
> It is a baby step - which is exactly what we need to be taking.

Jun 16 11:38 AM

[John Petersen:]

Advill, I think you and I are far closer to agreement than you know. PHEV and EV may be coming, but I believe they're probably a decade from cost-effectiveness. In the meantime, I see start-stop hybridization will likely become standard equipment rapidly because it's both cheap and easy.

The article I saw today on Mercedes' plan talks about how it wants to start-stop the entire line by 2011 and is hoping to catch up to BMW is at this link:

www.autocar.co.uk/News...

A Google search of volvo + start + stop gives you pages of choices. Same holds true for Fiat, Pugeot etc. This is a very real change that is happening right now. It won't mean much for makers of expensive batteries but it will mean a great deal for the lead-acid crowd (including Exide and hopefully Axion).

Davewmart, the point you're missing is that everybody is going in that direction. I use the term micro-hybrid because that's the technically correct term. The press prefers start-stop. The link you provided to green car congress relates to a "traction system" not a "start stop" system. There is an immense difference between the two. There is also a minor issue of production volume and pricing. Mercedes builds great cars, but not for Joe Lunchbucket.

Start with the link I just gave Advill, Then dive into Google and see for yourself. Micro and mild hybrids are not high profile innovation. They're an easy route to comply with regulatory requirements that do not require the level of engineering or design change that would go along with a level of hybridization that needs or can even use more exotic chemistry.

I understand that this is an emotional issue and opinions are often fervently held. But PHEVs are a decade away from commercial viability and getting the industry into a position where it can effectively use the technology when it's proven requires lots of intermediate baby steps. The micro and mild hybrids are the first significant steps. Then we will have to see what science, resource prices and an unknown future hold.

Jun 16 11:57 AM

[Advill:]

Sorry , i forgot part of my argument about ICE I have no doubt that inmediate improvements will come of "micro-hybrid", there are many more related with different approaches to mechanics but some of the techiques i am aware are:

1. Moving from steel to aluminium y blocks and gear boxes
2. Increasing operating temperature of combustion
3. Higher turbo pressures
4. Reduction of friction with new metal finisihg in autoparts
5. Smaller tolerances in moving parts
6. Plastics and fiber compounds in hood, doors etc.
7. Fabrics instead of steel in the bodies ( see Z4 of BMW concept car)
8. Low friction tires
9. Eliminating charger (alternator) using instead thermoelectric materials in exhaust pipe and PV in roof.
10. start/stop engines
11. Flexi-engines (2 cilinders instead of 4 or 6 or 8) depending driving conditions
12. Use of ethanol as a buster in the high point of the combustion cycle (you use gasoline an double injector system one for gas other for ethanol for a certain moment in combustion process).

There are others more wierd but this are solutions that car makers have in their toolbox BEFORE opting for masive shift to HEVs.

Regds


On Jun 16 11:38 AM Advill wrote:

> John:
> My point is... (talking of investments in companies that can be beneficiaries
> of trend changes)....Let say that European Union or US government
> decides to give 3,000 dollars to the bottom line of car companies
> for each car that complies with certain emission levels... I can
> bet the little finger of my left hand that many different solutions
> will be pushed not only HEV or EVs.
>
> We are investors no Greenpeace zealots and looking for the next winner(s)
> is the idea of Seeking Alpha blog and their readers (I assume).<br/>
>
> Regards

Jun 16 12:07 PM

[John Petersen:]

Advill, I knew we were closer than it seemed. The problem with a term like HEV is that it includes a broad spectrum from start-stop to PHEV. In my simplistic view of the automotive world, the big dividing line in the HEV world will be drawn at the capacity for launch from stop in electric only mode. Bigger starters and SLI batteries are very easy. Electric motors that can add 10 or 20 HP of boost for 15 seconds are more complex, but still fairly simple. Going to full hybrid like the Prius with electric-only launch from stop is a much bigger and far more expensive engineering project.

I don't know enough about automotive technology to estimate the speed or cost of implementation for the advances you've listed, but I'm quite confident that anything that can be implemented quickly and cheaply will be. Government always seems to take one of two approaches; either a carrot or a stick. As near as I can tell, both the EU limits on CO2 emissions and the accelerated CAFE standards in the US are of the big stick variety.

Jun 16 12:38 PM

[Don Harmon:]

On Jun 16 11:24 AM Advill wrote:

> Don:
>
> By the way...Do you know why polar bears can not be moved to south
> pole?

It could be a short term solution, but one that could well mean the extinction of emperor penguins followed by that of the bears.

Jun 16 12:49 PM

[Davewmart:]

Well John, I have googled until I am blue in the face and I still cannot trace anyone intending to build light hybrids or stop-start with lead acid batteries in that function.
You mentioned Volvo, but apart from their heavy equipment division AFAIK they are using NiMH - any precise links to contrary data?
Mercedes certainly are using lithium.
But to go through the list of the biggest car-providers for the US:
GM has been using the NiMH battery from Cobasys for it's early stop start batteries, I believe - they leaked. - Toyota's don't.
Ford has also gone NiMH:
reviews.cnet.com/sedan...
Toyota is obviously NiMH, as is Honda.
So, have you links to anyone's firm plans to use lead-acid other than in an ancillary role for stop-start?
Darned if I can find any outside of China.

Jun 16 01:43 PM

[John Petersen:]

Davewmart, I've done all I can to help you over this hurdle. For some reason you are unwilling to accept that (a) there are no factories to make the NiMH and Li-ion batteries you think everybody will use, and (b) even if the factories existed there wouldn't be enough lanthanum and lithium to keep them working. I can't go any further to prove a negative than I already have so I see no point in debating the issue further.

Jun 16 01:58 PM

[Don Harmon:]

Re-posted here from Bill Moore's column on EV World today:

Senator Stabenow started to explain that Capitol Hill is taking a different approach -- one that includes tax incentives for both manufacturers and ... here's the interesting part ... consumers, at which point, she off-handedly remarked that it (the current $7,500 tax credit found in the American Recovery and Reinvestment Act) probably wasn't high enough.

Hmmm. "Wasn't high enough?" Where'd that come from? I can hazard a guess.

A hour or so later, I was having lunch with John Lauckner, Andrew Farah, Robert Peterson and Bob Kruze, all from GM. In walked Dr. Ann Marie Sastry, who sat down with us, while a GM aide hunted up a box lunch for her. Very early in the conversation, she mentioned that the government of Japan was giving a nearly $15,000 subsidy to its car makers to help defray the purchase price of an EV. In essence, she said, American carmakers are being forced to compete with foreign governments and not just foreign carmakers. "We're not hearing the media reporting on this," she emphasized, add that she hoped those of use in the room would sound the alarm.

I was skeptical, so I contacted Mitsubishi and learned that, yes, in fact, buyers of the i-MiEV are going to get the equivalent of $14,200 tax break from the government. That will bring the price of the car down to just over $30,000. Still an appreciable chunk of change, but certainly better than the $45,000+/- they would have had to pay otherwise. And Mitsubishi isn't the only company to benefit. Subaru's Stella electric car will also come with an identical inducement.

To be honest, I think it’s great they are willing to subsidize the technology to that extent. While it will cost Japanese taxpayers, it will also spur investment and eventually bring down production costs, while securing the country's ongoing leadership in electric drive technology. We Americans and Europeans are talking a good game, but it’s the Land of the Rising Sun that will be first to market with electric cars.

Then again, there's something to be said for letting the competition work out the bugs first.

More on Mitsubishi EVs:
Mitsubishi not only appears confident that it's perfected its technology sufficiently to begin commercial production of the i-MiEV but also has announced its plans to offer five other e-drive vehicles.

The Japanese Nikkei news service reported last week that as part of Mitsubishi Motors Group Environmental Vision 2020, it is going to offer a left-hand drive version of the i-MiEV for Europe in the latter half of 2010. That also would make the car suitable for US roads, though it would also have to pass our rigorous crash certification. The company is also planning a sport version of the i-MiEV with improved performance. Both a commercial delivery vehicle and a full-size electric car are slated for 2011. Then for 2013, the company is planning a plug-in hybrid SUV.

This clearly pits Mitsubishi head-to-head with Nissan, which is pursing a similar electric car strategy. This is going to be very interesting to watch.

Jun 16 02:00 PM

[Don Harmon:]

Check this video out: www.artcenter.edu/summ...

Jun 16 02:28 PM

[Davewmart:]

John said:
'Davewmart, I've done all I can to help you over this hurdle. For some reason you are unwilling to accept that (a) there are no factories to make the NiMH and Li-ion batteries you think everybody will use, and (b) even if the factories existed there wouldn't be enough lanthanum and lithium to keep them working. I can't go any further to prove a negative than I already have so I see no point in debating the issue further. '

Toshiba already manufactures hundreds of thousands of NiMH batteries a year.
There are nearly zero lead-acid batteries being produced for other than traditional functions in a car.
You do not seem able to provide a single link to anyone at all who is building a lead-acid stop-start battery for a micro-hybrid - are you able to substantiate your comment that Volvo is doing so or not?
As for advanced lead-acid, it appears to be in an even earlier stage of readiness for hybrid car use than lithium - who is building prototypes for it?

There is very substantial evidence that car manufacturers and battery providers are moving towards powering a variety of hybrids from stop-start to plug-ins with NiMH batteries or lithium, and I certainly have found no evidence at all that anyone is interested in the lead acid alternative, or that it is being readied for use in this function.

If you have evidence, please share it, otherwise you seem to be presenting an alternative that is simply not being followed, and that if it occurs at all will only happen after a lapse of some years if they fail to make the alternatives they are working on function, through material shortages, cost or whatever.

Jun 16 02:53 PM

[John Petersen:]

Don, I'm delighted to see manufacturers actually beginning validation testing and am frankly surprised that Mitsubishi is willing to talk about starting at the 20,000 unit level. But until somebody can talk about an EV or PHEV that can stand on its own merits without government subsidies, it won't be an economic decision. It will be a government funded R&D program.

Jun 16 03:01 PM

[TinyTim:]

Don's comment re the lack of glamor in lead may or may not apply to consumers, but I think it will be a strong sell for the folks dishing out the money:

www.edn.com/blog/14700...

Note the comment about larger format Li automotive batteries. It's amazing that Tesla uses 5000+ AA batteries because that's the std form.

Jun 16 04:30 PM

[Don Harmon:]

Tiny Tim, Tesla's persistence with the smaller format cells traces back to Martin Eberhard who I have had more than a few discussions with. His contention then was they were readily available and a commodity item from mass production for notebook computers. Translation - cheap. He claims that solving the thermal runaway with these Li-ion Cobalt cells was a piece of cake! I reminded him that maybe that piece of cake they designed helped boost the price of the Tesla to over $100K ? There are certain people who you just can't budge and Martin is one of them.

Jun 16 06:09 PM

[User 432382:]

John, I'm a newcomer to battery companies and I've become interested in Axion Power reading your articles and was wondering how their lead-carbon battery relates to the micro and mild hybrids you describe in this article. Your article states that "All currently available HEVs use beefed-up lead-acid batteries for their start-stop functions and NiMH batteries for their powertrain functions". So are you saying that "regular" lead-acid batteries are all that's needed for micro-hybrids and lead-carbon batteries would be overkill for this application just as you say Li-ion and NiMH batteries are? So that would leave powertrain functions in mild/full hybrids the only application for lead-carbon batteries? Or do you see applications for lead-carbon batteries for micro hybrids? Just trying to grasp the potential for Axion's lead-carbon battery as it relates to this article. Thanks!

Jun 16 11:04 PM

[John Petersen:]

Davewmart, roughly $800 million in NiMH batteries were used in HEVs last year. If the Frost & Sullivan forecast is right, roughly $1.6 billion in HEV batteries will be needed next year. That $800 million shortfall cannot be filled by factories that don't exist. There are only two possible outcomes:

1. The HEVs will not be built because manufacturers can't get the precise batteries they want; or
2. The HEVs will be built using the only readily available substitute, advanced lead-acid.

I cite DOE studies and in depth analysis by firms like Frost & Sullivan while you only seem to care about press releases or stories from reporters who generally don't understand what they're writing about. The undeniable facts are that (a) there are no factories to make the additional NiMH batteries that rapid expansion of the HEV market will require, and (b) even if the factories existed there wouldn't be enough lanthanum to keep them working.

Jun 17 01:30 AM

[John Petersen:]

Tiny Tim, last week's article focused on an unpublished draft roadmap for Li-ion battery development and commercialization that was written by the DOEs staff at the end of last year. It provides a refreshingly sober view of where Li-ion battery technology is today and what will need to happen before Li-ion can become a viable technology for large format applications like HEVs. The DOE is not staffed by wild-eyed optimists and they're not impressed by PR. They're impressed by facts, figures, multi-year development timelines and real world validation testing.

The DOE's funding opportunity announcement for the battery manufacturing grants said they wanted to make 7 or 8 grants of $100 to $150 million each. It described eligible projects as follows:

"For each award made in this area, recipients are expected to build, or increase production capacity of, manufacturing plant(s) in the United States that can produce, or be expanded within the constructed factory’s footprint to produce, 20,000 to 100,000 PHEV batteries and/or their cells per year or equivalent volumes of other EDV, or microhybrid (stop/start assist) batteries. For purposes of production volume estimation each PHEV battery must be capable of delivering at least 5kWh of available energy (100,000 to 500,000 kWhs)."

With well over 100 grant applicants, I would be very reluctant to bet heavily that a particular company will or will not receive a grant. I would be terrified of companies like Ener1 and Valence that will dry up and blow away if they don't get the grants they've asked for.

Jun 17 01:55 AM

[John Petersen:]

User 432382, all of the lead-acid battery producers make premium products that are better suited to the requirements of micro and mild hybrids than the standard VRLA that automotive OEMs currently use for starting, lighting and ignition. These products are more expensive than normal starter batteries, but 1/4 to 1/3 of the cost of the exotic chemistries. While these advanced lead-acid products can do the job for a micro or mild hybrid application, they still have some cycle life issues that would likely result in at least one round of battery replacement over the life of the vehicle.

Axion's PbC will offer lower weight, higher power and longer cycle life at a price that's competitive with advanced lead acid (e.g. 1/4 to 1/3 of the cost of exotic chemistries). So instead of being overkill, it's more like a perfect fit in terms of cost and performance. When you start moving up into "traction batteries," devices that put more horsepower on the ground, the applications and engineering get a lot more complicated.

Jun 17 02:12 AM

[John Petersen:]

Yesterday's Greentech Media article on Axion was reprinted here on Seeking Alpha today:

seekingalpha.com/artic...

Jun 17 08:11 AM

[Don Harmon:]

Toyota will procuce 1M NiMh battery packs in 2010. Your comment from Frost & Sullivan is in dollars, whilst Toyota's production is in complete battery packs?

www.greencarcongress.c...


On Jun 17 01:30 AM John Petersen wrote:

> Davewmart, roughly $800 million in NiMH batteries were used in HEVs
> last year. If the Frost &amp; Sullivan forecast is right, roughly
> $1.6 billion in HEV batteries will be needed next year. That $800
> million shortfall cannot be filled by factories that don't exist.
> There are only two possible outcomes:
>
> 1. The HEVs will not be built because manufacturers can't get the
> precise batteries they want; or
> 2. The HEVs will be built using the only readily available substitute,
> advanced lead-acid.
>
> I cite DOE studies and in depth analysis by firms like Frost &amp;
> Sullivan while you only seem to care about press releases or stories
> from reporters who generally don't understand what they're writing
> about. The undeniable facts are that (a) there are no factories to
> make the additional NiMH batteries that rapid expansion of the HEV
> market will require, and (b) even if the factories existed there
> wouldn't be enough lanthanum to keep them working.

Jun 17 11:54 AM

[John Petersen:]

Don, equipment to manufacture battery packs is meaningless if you can't get the raw materials and Toyota is double humping right now trying to find the lanthanum. Jack's recent article on that critical issue is here:

seekingalpha.com/artic...

When Lifton warns that the raw materials to expand NiMH production much beyond current levels are not available, it's a warning that I take very seriously indeed.

This is one of those instances when press releases can be guilty of sins of omission by only telling part of the story.

Jun 17 12:26 PM

[Don Harmon:]

Why can't someone interview Toyota and ask about these concerns? Would Toyota / Panasonic make deliberate false claims about production capacity - to what possible advantage?

It seems a lot of debate could be edited quickly if we all had some kind of "transparency" between automotive companies and journalists don't you think? It's curious to me that the public has to rely on these "official reports" from Frost & Sullivan to learn something that to me would be much more simple to just have a good automotive journalist sit down with Katsuaki Watanabe and interview him.

After all isn't that what CEO's are for?

Jun 17 01:26 PM

[Don Harmon:]

What Watanabe has said about batteries:

Will Toyota use Lithium-Ion batteries in the next generation hybrids?
We will change the battery from nickel hydride to the lithium battery, and therefore we would like to reduce the size of the motors and inverters by half, so the overall size of the hybrid system can be reduced by half.

There's been a lot of discussion lately over how long it will take Li-Ions that are safe and durable for autos. Will the batteries be ready in time?
Yes, I believe we can develop this battery in time. Occasionally I visit the site where the development is going on to see the trial model.

But were you worried by Sony's problems last year when Li-Ions in laptops were reportedly catching fire?
Of course, we're experimenting on the problem that Sony encountered last year. We are making sure that the problem can be avoided. Automobiles are used in different conditions. For example, cars are used in temperatures from -20 degrees Celsius to 40 degrees Celsius and are constantly exposed to high vibrations. It's extremely difficult to build those systems for automobiles compared with cell phones which are used in relatively stable environments. These difficulties must be reflected in the design.

Last I can find of him discussing batteries and this was back in 2007. Time to re-interview him don't you think?

www.businessweek.com/m...

Jun 17 01:41 PM

[John Petersen:]

Don, Toyota will begin validation testing on a 500 vehicle fleet that it intends to lease globally. This is not by any stretch of the imagination a commercialization decision. It is testing only:

The quotes from Toyota officials at this year's Meeting of the Minds conference in New York at the beginning of this month tell a different story. Among the more notable quotes came from Irv Miller, Toyota’s group vice president of environmental and public affairs and Bill Reinert, the company’s national manager of advanced technology.

"Miller said that the promise of the lithium-ion battery pack—used in both PHEVs and pure battery EVs—has led to “inflated expectations beyond the technical realities.” As evidence of irrational exuberance, he cited both San Francisco Mayor Gavin Newsom’s declaration that traditional hybrids are “yesterday’s technology” and President Barack Obama’s pledge to have a million PHEVs on the road by 2015.

For Miller, it’s not altogether clear that consumers are willing to pay a premium for the extra miles of all-electric range that PHEVs offer. “Judgment Day is just around the corner,” he said. “And the challenge here is that after the charge runs down you’re carrying around 300 pounds of dead batteries. The dog doesn’t hunt.”

Reinert cited studies from both Carnegie Mellon and Duke Universities that are skeptical of PHEV claims. In a chart-heavy presentation, he said that carrying around extra battery weight means increased diameter steel for subframes, bigger brake size and larger springs. “There’s a big weight penalty, and you’re always paying it,” he said. “There are diminishing returns when you keep increasing the size of the battery pack.”

Reinert says PHEV buyers will be trading in Priuses and other hybrids, not Hummers (further diminishing the green advantage). Of course, battery advances could considerably reduce the size, cost and complexity of larger-output packs, but Miller said that battery technology has lagged behind that of hydrogen fuel cells."

industry.bnet.com/auto.../

Jun 17 02:12 PM

[Don Harmon:]

I forgot- I posted that link here in a previous article :-)

Jun 17 02:23 PM

[NorthernPiker:]

Toyota may well be engaging in mis-direction with regards to Li-ion technology to the extent that they are confusing themselves.

The quotes from Toyota officials at this year's Meeting of the Minds conference in New York at the beginning of this month are at variance from those of Masatami Takimoto, Toyota’s Executive Vice President responsible for research and development. According to a March 2009 interview he, “confirmed that the company’s long-standing scepticism (sic) towards lithium ion battery technology has now been put to rest.”

www.autocar.co.uk/News.../

The conclusions of the study from Carnegie Mellon that is cited by Bill Reinert, Toyoat’s national manager of advanced technology, has been disputed by Mark Duvall, director of electric transportation at The Electric Power Research Institute (EPRI).

www.spectrum.ieee.org/...

Jun 18 12:33 PM

[John Petersen:]

Northernpiker, frankly I'm confused about what's going on at Toyota because the Takimoto quote continued:

“We have made much development progress with lithium ion batteries over the last six months,” said Takimoto. “We are now convinced that they can be used in our future plug-in hybrid and all-electric vehicles, although our cheaper hybrid models will continue to use nickel metal hydride batteries.”

Given the small number of vehicles planned and the frequent use of the word "experiment" in the press reports, my inclination is that this truly is the beginning of validation testing and market research to see whether the buying public wants PHEVs and EVs.

Jun 18 01:18 PM

[Don Harmon:]

I agree with both of you- the unusual facet of this fascinating field is that Lithium-ion is still on an upward curve of development. I have seen it in our own cells making an improvement on energy density close to 40% within one year ago. I am not going to speculate on how much more will be possible - but it seems to me we will squeeze another 25 -30% again by 2010 which should be close to being viable for HEV & PHEV vehicles?

Jun 18 03:44 PM

[Jack Lifton:]

John,

Let's look at your favorite explaining operator, economics. Toyota has built, is operating, and is expanding a nickel metal-hydride battery r&d and manufacturing plant in Japan. The plant is currently ahead of schedule in ramp-up from 1,000 Prius power train sized batteries a day to the 3,000 per day scheduled originally for 2011. Just yesterday Toyota announced that the plant had reached a production rate of more than 50,000 batteries a month. I know this is "more" because the announcement was that Prius production had now reached 50,000 per month, and the Prius is not the only Toyota car model using a NiMH battery. In addition Toyota, the world's largest maker of lift-trucks, has announced a hybbrid lift-truck "for sale" that uses a "large" NiMH battery.

Toyota has a long and expensively established supply chain for Chjinese sourced rare earths, lanthanum for batteries, and neodymium and praseodymium for permanent magnets, for electric motors, and batteries. Toyota has committed to the joint development with the Viet Namese Government of a substantial new mine to produce rare earths. This development will take between 3 and 7 years to bring to full production (as would any new mine anywhere), and it will cost at least $250,000,000 before the first gram of rare earth is extracted, separated, and refined after which it would be sent to the costly operation to make the battery cathode alloy or the magnet alloy powder after which it would go to the electrode or magnet fabricator after which it would go to the battery or motor fabricator. Almost every step I just enumerated is done or to be done directly by Toyota or a subsidiary or a joint venture partner (e.g., Panasonic). No one else in the OEM automotive industry is so vertically integrated in a supply and value chain for specific products. NO ONE.

Toyota has made more than $25,000,000,000 of NiMH using products. Toyota plans to produce that same amount of product EVERY YEAR beginning in 2011!

When do you think the new CEO of Toyota, the grand-nephew of the last commanding admiral of the Imperial Japanese Combined Fleet (i.e, the CNO) is going to say "Oops, we made a mistake. We should dump all of that, take a loss, and see if we can stay in business."

It's much more likely that Toyota will emphasize all of the negatives of lithium-ion batteries and EVs using them and grab all of the mid-range, mid-performance market share that it can with NiMH using hybrids. Toyota will at the same time produce small gasoline and diesel engine cars (as well as large ones for the wealthy), and, I think, a line of lead(carbon)acid cars including pure EVs and hybrids with range, performance, and emissions that can only be bettered by their NiMH lines.

It's too late for anyone else to get into the mass production of hybrids using NiMH batteries, because the supply chain takes a DECADE to establish and refine.

Toyota has invested, I'm guessing, more than $10,000,000,000 so far in the NiMH based powertrain. Unlike American companies Japanese companies like to make a return on capital, and they think long and hard before they invest.

Just to keep throwing money at a technology without any regard for the probability of return on the investment or the cost and time frame of the necesary infrastructure to support a technology if it looks practical is a Western way of doing business. It is stupid, wasteful, and short sighted, and it is why we are so far behind in the mass production of PRACTICAL technologies.

Jack Lifton

Jun 18 04:09 PM

[Don Harmon:]

Jack, you just proved that Toyota will be pushing NiMh, and NOT advanced carbon (lead acid) battery systems!

Thanks,
Don Harmon

Jun 18 04:24 PM

[Jack Lifton:]

Don,

As far as Toyota goes I think that's right. But note that toyota has a lock on the natural resources for NiMH batteries that are available outside of China today. It is pure idiocy for anyone not now in the NiMH battery game to go there for mass production. This means that everyone else in the profit-making OEM automotive sector is now looking hard at their remaining options. If EVs and hybrids are viable options for anyone but Toyota it will be with lithium-ion or lead(carbon) acid technology. In the near term the lithium just will not be available, so the winner is, as John Petersen says, lead-acid.

Lithium is a long term solution, which may well work out, but that will be between 10 and 25 years from now. Long past my interset.

Jun 18 04:41 PM

[jimp:]

Instead of guessing on which battery company that will take the lead, why not invest in rare earths metals? Rare earths metals, being a technology metal most likely will be in large demand going forward, especially with the ramp up to Alternative energies, LED lighting etc..
Lynas Corp (LYSCF/ LYC:AU) has one of the largest reserves of rare earths on the planet, and will be producing a refined product by late 2010.
Jack Lifton recommends Avalon rare metals.

Jun 18 04:58 PM

[Don Harmon:]

Simply your opinion and I respect it.

Don


On Jun 18 04:41 PM Jack Lifton wrote:

> Don,
>
> As far as Toyota goes I think that's right. But note that toyota
> has a lock on the natural resources for NiMH batteries that are available
> outside of China today. It is pure idiocy for anyone not now in the
> NiMH battery game to go there for mass production. This means that
> everyone else in the profit-making OEM automotive sector is now looking
> hard at their remaining options. If EVs and hybrids are viable options
> for anyone but Toyota it will be with lithium-ion or lead(carbon)
> acid technology. In the near term the lithium just will not be available,
> so the winner is, as John Petersen says, lead-acid.
>
> Lithium is a long term solution, which may well work out, but that
> will be between 10 and 25 years from now. Long past my interset.

Jun 18 06:10 PM

[John Petersen:]

This has all been very interesting but the conversation keeps drifting away from the point of the article; which is start-stop hybrids that have no traction boost and micro hybrids that only have a little. No OEM uses anything but lead-acid for bare bones start stop functions and that is not going to change anytime soon.

Regardless of what the automakers decide to do with plug-ins and their high end full hybrids the bottom 80% to 85% of the bell curve will remain firmly in the lead-acid camp, which will be a huge revenue boost for lead acid manufacturers.

Jun 19 12:55 AM

[John Petersen:]

The following quote from a Johnson Controls Power Solutions Backgrounder should put the entire issue in much sharper focus.

"We sold 400,000 advanced batteries for start/stop micro hybrid vehicles in Europe in 2007 and 800,000 in 2008, with the expectation of doubling that number again in 2009 to approximately 1.5 million batteries. These vehicles achieve a 5 percent to 8 percent fuel savings compared to conventional gas vehicles."

www.johnsoncontrols.co...

We can argue about what the OEMs plan to do till hell freezes over but this piece tells us very clearly what they are doing today and have been doing for the last couple of years.

Jun 19 01:16 AM

[Don Harmon:]

Johnson Controls offers a wide range of technologies to its customers, including lead acid batteries, absorptive glass matt (AGM) applications, nickel-metal hydride capabilities and lithium-ion energy storage solutions for hybrid electric vehicles and plug-in hybrid electric vehicles. In addition, our highly recognized global brands underscore our expertise and include:

Jun 19 01:46 PM

[John Petersen:]

Don, we all know that JCI makes a world of products, but with global HEV sales of just over 500,000 in 2008 and Panasonic making roughly 70% of the NiMH battery packs used (350,000 units), the maximum NiMH battery pack production from JCI would have been 150,000 units. Since we know there were no Li-ion battery packs used in HEVs during 2008, there is only one remaining alternative; lead-acid. Besides, the JCI statement specifically related to start/stop micro hybrids, and as I keep saying, none of that market is going to NiMH or Li-ion.

Jun 19 02:26 PM

[Don Harmon:]

Gotcha.....I wasn't sure or missed the reference specifically to Lead Acid. That was my confusion in reading the post. .. since I knew JCI offers a wide range of different chemistries.

Jun 19 02:54 PM

[tireman63:]

In re Advill's item #8--low friction tires--no way! He probably meant low hysteresis tires, or units with lower rolling resistance. Without adequate friction (or grip), you could neither go nor stop. John, can you give us a reference to basic battery terms? I did not understand the expression "valve regulated lead-acid". Is that the new spiral wound semi-dry types like the Optima? Also, what makes up an advanced lead-acid battery--does it include the capacitor, the graphite foam electrode, or both? The mayor of San Francisco is unable to distinguish between feces and wild honey, as far as his remarks about hybrid development. Maybe he spent too much time in the Haight-Asbury district.

Jun 19 03:34 PM

[Don Harmon:]

Go to Battery University: www.batteryuniversity.com/

Jun 19 03:51 PM

[tireman63:]

Mr. Harmon--thank you very much--I have downloaded enough information for at least one semester.

Jun 20 10:03 AM

[Don Harmon:]

Glad to be of service!

Jun 20 09:15 PM

[Bryan Gomez:]

Now that Volvo chose Ener1, how about that now? Should we include it in our list?


On Jun 15 10:39 AM John Petersen wrote:

> Isaac, the Frost &amp; Sullivan slide presentation has a lot of data
> on the newly emerging start-stop micro-hybrids and the limited boost
> mild hybrids. The only one I can identify off the top of my head
> that has announced plans is Volvo, but they haven't identified their
> supplier. Right now it's primarily a European phenomenon because
> their CO2 standards have been in place longer. But it's a virtual
> certainty that the trend will rapidly migrate to the states. The
> download link for the complete PDF is:
>
> awbriefing.com/present...

Sep 21 09:41 PM

[John Petersen:]

Bryan, Volvo has selected Ener1 to supply batteries for its C30 Battery Electric Vehicle Prototypes and its V70 PHEV prototypes. These are limited production test vehicles that have nothing to do with its plan to implement stop-start technology across its entire product line. The difference is immense. There will be a handful of C30 and V70 prototypes and somewhere in the neighborhood of 400,000 stop-start hybrids. So while Ener1's contracts are interesting, I wouldn't break out the champagne.

Sep 22 02:16 AM