Electric Car Batteries Need Time to Refuel

Did battery technology die with the declared bankruptcy of A123 Systems? While the electric car battery maker has fizzled out, it is now hitching a ride with Johnson Controls, which will buy up its factories and help bankroll the enterprise.

This is not just another belly flop. The Michigan-based company accessed $132 million in federal grants under the 2009 stimulus plan. Johnson Control’s life raft is of little consolation to those who say that government should help get this industry on its feet. Critics are already lampooning the failure, saying it is indicative of the president’s track record -- one of picking “losers” like Solyndra. 

“A123’s bankruptcy is yet another failure of the president’s disastrous strategy of gambling away billions of taxpayer dollars on a strategy of government-led growth that simply does not work,” says a Romney campaign press statement. 

For its part, the Obama administration has been subsidizing the electric car market in the form of giving buyers tax credits worth as much as $7,500, as well as by awarding companies loan guarantees that are intended to be repaid. Meantime, it has provided outright grants totaling $2 billion. ??

Advocates say that the administration is trying to get past the dinosaur age of fossil fuels and into the modern realm. The incentives are necessary to grow the market and to create economies of scale that would improve technologies and decrease prices. Consumers would then be attracted and the subsidies could cease. 

Skeptics of the federal spending are arguing that the market knows best. The internal combustion engine has survived all of these years not because of a lack of creative thinking but because it works better than anything else. Cars that run on gas can travel much longer distances than those that are powered by electricity.

Take the Chevy Volt: In 2011, GM sold 7,600 of those cars, short of its goal of 10,000. In 2012, it had wanted to sell 45,000 of them. But the company is a long way off. In fact, electric vehicles accounted for 2 percent of all cars driven off the lot in 2011, according to the Electric Drive Transportation Association.

Presidential Fodder

As for A123, it’s troubles are less about its technologies and more about the economics of car buying. As sales of the Chevy Volt show, the demand is not there yet. To boot: A123 had a contract with Fisker Automotive to supply its $100,000 plus luxury electric cars. But because of a glitch, it had to recall those batteries. 

To be fair, A123 has had bipartisan support. Its first booster was the Bush II administration before getting monies from the state of Michigan. That state’s U.S. lawmakers then petitioned successfully the U.S. Department of Energy so that the company could win stimulus money. Meantime, it was still able to attract about $750 million in private capital. 

“In an emerging industry, it’s very common to see some firms consolidate with others as the industry grows and matures. Accordingly, today Johnson Controls, a world leader in energy technologies based in Milwaukee, Wisconsin, has offered to purchase two Michigan manufacturing facilities built by A123 Systems, along with other assets in A123’s automotive battery business,” writes Dan Lestikow, with the Energy Department, in his blog. ??

He says that the advanced battery market is expanding globally from $5 billion in 2010 to what will become $50 billion in 2020. The Toyota Prius, for example, is the third best-selling car in the world. At present, more than 40 such hybrids exist, produced by nearly every car maker. That is why the administration is investing in electric car batteries, he says, noting that more than 30 such plants are operating throughout the United States and employing thousands. ??

It’s all achieving results, says Lestikow: In the last five years, electric batteries with a 100-mile range cost $33,000. With the greater efficiencies, the price today is $17,000. Just down the road, he adds, it will be $10,000. 

“Assistance is needed if electric batteries are to expand and to improve,” says Mitch Pulwer, president of Celgard, in an earlier talk with this reporter. That will enable those manufacturers to meet the expected future demand, as well as inspire the businesses necessary to build a vibrant supply chain, he adds. ??

A123’s demise is good fodder for the presidential election. But federally-fueled electric car batteries, generally, have earned bipartisan endorsements. To succeed, though, the demand for such vehicles must exist. Consumers are slow to adopt but activists are saying that progress could accelerate with continued government support.

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