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June 18, 2009

News & Features

Automakers are busy designing electric cars, but who's making the batteries?

Associated Press

Batteries

Illustration by Andy Zapata

DETROIT -- The car world is stepping on the accelerator as it shifts away from the piston and toward the electron.

At January's North American International Auto Show in Detroit, nearly every major automaker, including General Motors, Ford and Toyota, announced plans to develop more electric vehicles.

But amid all the chatter about charging times, range and 0-to-60 speeds, an essential business question is emerging. Many industry experts say it could utterly change the complexion of the auto business: Who makes the battery?

"The battery is critical," says Larry Burns, head of research and development and strategic planning at GM.

Burns says that because the battery is the most expensive and high-tech component in an electric car, the companies that make batteries well -- rather than those that can efficiently weld together steel frames -- could emerge as the most powerful players in the industry.

Quick-switch battery technology
  • California-based company Better Place has developed a battery-switching technology that could overcome a key obstacle to the adoption of electric cars -- their reliance on frequent, long stops for recharging.
  • The company wants to establish a ubiquitous network of battery-switch stations where drivers can quickly swap a drained battery for a fully charged one, putting them back on the road in minutes. Drivers would pull onto a conveyor, where an automated platform below the vehicle would remove the old battery and replace it with a new one. The idea relies on automakers producing cars with removable batteries.
  • -- Associated Press

The auto industry, Burns says, is not unlike the computer business, which was once led by hardware makers but now is dominated by software and services. "If you look at the major industries that have been transformed," he says, "not many of the incumbents come out of that transformation strong."

If so, might the next automotive behemoth be BYD? The Chinese company controls nearly one-third of the world's cellphone-battery market, but recently decided to make cars and now is pushing hard into electric transportation.

In January, BYD unveiled a battery-powered vehicle it claims can go 250 miles on a single charge; it will go on sale in China this year.

"Our leading position in rechargeable-battery technology ... has given BYD a unique advantage," says Wang Chua-fu, chairman of the Shenzhen-based company, which hopes to b
ring its electric car stateside in 2011 and build plants in the U.S. soon thereafter.
The idea that expertise in the petroleum-fired engine may no longer dictate the auto industry's direction has many old-line companies on high alert.

"This is an absolute game-changer," says David Cole, chairman of the Center for Automotive Research. He believes batteries will become so critical that assuring they are produced in the U.S. will become a matter of national security. "I've never seen anything that has as much potential to alter the way this industry operates," he says.

Ford is eschewing the carmaker-as-battery-maker strategy, however. The company is developing a midsize battery-powered vehicle for sale in the U.S. in 2011, as well as a plug-in hybrid for 2012. But unlike GM and Toyota, Ford has no plans to develop the battery itself. Instead, it's handing those duties over to Magna International, a global supplier in Ontario, Canada.

"In an environment where there are limited resources, our argument is: Why don't we work with people that already have the technology in hand?" says Mark Fields, Ford's president of the Americas. He says the company would not develop its own batteries: "As we go forward, we'll work with other people."

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