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Report Predicts Lithium-Ion Batteries Glut

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Report Predicts Lithium-Ion Batteries Glut

Business

Report Predicts Lithium-Ion Batteries Glut

Report Predicts Lithium-Ion Batteries Glut

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There are warnings of a technology bubble around the lithium-ion batteries that power hybrid cars. A leading consultancy says battery producers will soon end up with twice the capacity needed to supply plug-in cars. John Gartner, senior analyst with Pike Research's clean transportation practice, talks about the coming lithium-ion battery glut.

ROBERT SIEGEL, host:

With automakers producing hybrids, plug-in hybrids and perhaps all electric cars, one thing they'll need is lots of lithium-ion batteries. That used to be seen as a problem: Where would all those batteries come from?

Well, battery makers went into high gear, and with government subsidies here and abroad, they set out to build battery factories. And now it seems that the lithium-ion battery business, like the Energizer bunny, just keeps on going and may in fact outstrip demand one day.

Are we looking at a lithium-ion battery glut? Well, joining us to address that question is John Gartner, who is senior analyst with Pike Research's clean transportation practice in Portland, Oregon.

Welcome to the program.

Mr. JOHN GARTNER (Senior Analyst, Pike Research): Thank you.

SIEGEL: And are we looking at a lithium-ion battery glut?

Mr. GARTNER: I think there is the potential for a glut in the next few years. Today, as you mentioned, there is a heavy emphasis on increasing manufacturing capacity and really ramping up to meet this expected demand. However, that demand, as anticipated by the auto manufacturers, may actually be a bit overoptimistic for what consumers will actually want.

SIEGEL: Now, the kind of batteries we're talking about, this battery is the main component of the cars that we're talking about. How much do these batteries typically cost?

Mr. GARTNER: Depending on the type of vehicle, they can run as much as 10 to even $15,000 or between 30 to 40, maybe even 50 percent of the total cost of the vehicle.

SIEGEL: Well, if in fact production of batteries is stimulated, is it conceivable that cars with lithium-ion batteries will be - so many will be outfitted in the coming years that their price will come down?

Mr. GARTNER: Yes, that's the hope and anticipation. Battery manufacturing is really a new industry for vehicles. Most of the companies that are doing it have only been doing it for a year or maybe a few years at the most.

In the United States, many of these companies are start-up companies. And so they've been really going gangbusters and adding capacity, and really ramping up with a lot of plants being built today and into next year. And so, in 2011, 2012, they're really looking at having full-volume production. And this could actually exceed the demand of the vehicles.

SIEGEL: Exceed by a few batteries or exceed by entire multiples of the number of units sold?

Mr. GARTNER: Probably by a healthy percentage, maybe 25, 40 percent, depending on how well the electric and plug-in hybrid vehicles are accepted by consumers.

SIEGEL: And if the U.S. or European companies that have subsidized production, if they were to figuratively pull the plug on those subsidies, would the industry fall apart tomorrow?

Mr. GARTNER: Well, it's going to be a challenge because the cost is so high relative to the overall vehicle cost. Manufacturers are really going to be struggling, and automakers, to make this a product that consumers can afford.

Battery cost is probably the main objective of what the automakers would like to see come down in cost.

SIEGEL: Now, we're talking about auto batteries, but isn't there some at least potential application to the power grid down the line from this lithium-ion technology?

Mr. GARTNER: That's correct. The same exact technology has application to serve as a battery backup, if you will, for the grid and to supplement the grid services. It's called ancillary services. These batteries really quickly deliver energy to help keep the grid flowing as it should.

SIEGEL: So 2012 is our appointment with reality for lithium-ion batteries, you're saying.

Mr. GARTNER: Yes, it could be a real critical year especially for some of these start-up companies that are entering this field. If there is a glut in that year, prices might drop much quicker than people are anticipating. And that could make it real difficult for them to turn a profit with their battery production.

Some companies may not survive that year.

SIEGEL: John Gartner, senior analyst with Pike Research's clean transportation practice in Portland, Oregon, thanks a lot for talking with us.

Mr. GARTNER: I appreciate it. Thanks for your time.

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