Monthly Focus No 7 - 2009

MONTHLY FOCUS NO 7 - 2009

Rise of the Rechargeable Car Battery

By LIM Tae-Yun September 2009

1. Rise of the Rechargeable Car Battery Rechargeable car batteries are usually used as a power source for mobile IT devices such as cell phones and laptops. However, with the ever continuing development of technology, battery storage capacity has increased and are now widely used in cars and for electricity storage. Green cars such as hybrids and electric cars, in particular, have been hailed as the new demand source for rechargeable car batteries. Green cars need larger storage batteries than mobile IT devices therefore has the potential to be a big source of demand. For instance, GM’s ‘Volt’ due out in 2010, will need a rechargeable car battery with electricity storage the size of 4,000 to 5,000 cell phone batteries.

Table 1. Three Major Applications of Rechargeable Batteries Applications IT Products

Main Features ▷ Most common application - Longer duration, miniaturization and light weight are important ▷ Green cars e.g. hybrids and electric cars

Cars

- High power output (capacity is over 50 times larger than that of rechargeable batteries for laptops), durability (over 15 years), and safety (removal of explosion risk) are necessary. ▷ Storage for surplus wind power and solar energy

Electricity Storage

- Since it is a fixed fixture, there is no need for strict requirements e.g. rechargeable batteries for cars.

Source: Ministry of Knowledge Economy, Battery R&D Association of Korea (September 5, 2008). “Development Strategy for Rechargeable Car Batteries in an Age of Ubiquity”; Samsung SEI Homepage http://www.samsungsdi.co.kr/front/products/ regeneration/car/p_3_2_1t_1.jsp.

With the continued tightening of environmental regulations, the green car market is expected to grow rapidly. The US plans to intensify current regulations by 42% and introduce the 35.5 miles a gallon rule by 2016. China, on the other hand, is in the process of preparing regulations that are even stricter than that of the US, with the aim of implementing them in 2015.

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Consumer interest in green cars is also rapidly growing. In Japan, Honda’s hybrid ‘Insight’ and Toyota’s ‘Prius’ were the best-selling vehicles for last April and May. Until recently, other than Toyota’s ‘Prius’ there were no hybrid models by other major car makers, however, now global automakers such as Honda, GM, BMW and Hyundai Motor are releasing or planning to release green cars, providing a wider range of choice to their customers.

Table 2. Release of Green Cars around the World

Company

Released Model and Plans to Release

Toyota

▷ Third generation Toyota hybrid 'Prius', Lexus Hybrid'HS250h'(2009)

Honda

▷ Hybrid car 'Insight'(2009), Hybrid sports car 'CR-Z'(2010)

Mitsubishi GM

▷ Electric car 'i-MiEV'(2009) ▷ Plug-in hybrid car 'Chevrolet Volt'(2010) ▷ Electric car 'MINI E'(released in 2008) entered into the American market

BMW (2009) ▷ 'Avante LPi hybrid' (2009), Medium-sized hybrid car (2010), Plug-in hybrid Hyundai Motor

(2012)

Source: Announcements and press releases made by each company.

In tandem with the growing interest in green cars, rechargeable battery manufacturers are increasing investment despite the economic crisis. Panasonic embarked on a 100 billion yen investment to construct a production facility. And Hitachi is planning to increase its production capacity by 70 times to produce 700,000 batteries per year by 2015. Finally, SB LiMotive, a joint venture of Samsung SDI and Robert Bosch acquired US battery manufacturer Cobasys.

The main limitation of rechargeable batteries is that it is expensive (its price is about the same as a small car) and maximum driving distance on a single charge. However, if 3

history is any guide, technological limitations can be gradually overcome. IBM announced plans to develop a rechargeable battery with a capacity that is enhanced by ten times its current capacity, allowing the car to go up to 800km without needing to recharge.

The automobile industry will likely undergo major changes in the future if rechargeable batteries become cheaper and their efficiency improves. Cars will become more like electric appliances and have a simple mechanical structure once they are equipped with a rechargeable battery instead of a fuel tank. This will eventually result in the lowering of the entry barriers to the industry. In the future, it is highly possible that the electric car industry will be led by competitive rechargeable car battery manufacturers, resulting in fiercer competition. Chinese rechargeable battery manufacturer, BYD’s advancement into the electric car industry may be just a glimpse of what lies ahead.

2. Competition to Take the Lead in the Rechargeable Car Battery Industry

(1) Companies in Various Trades Compete with Each Other

Companies of various industries such as electronics, automobile, chemical and energy are competing with each other in the rechargeable car battery industry. Electronics companies, leaders in rechargeable batteries for mobile IT devices are looking to the rechargeable car battery industry as the next promising business venture. In this respect, Panasonic is pro-actively taking steps, acquiring Sanyo, the No.1 lithium ion rechargeable battery manufacturer, and constructing new production facilities.

Meanwhile, green car makers are trying to secure a stable supply of rechargeable car batteries, the core component of the green car. As part of efforts, Japan’s Toyota, Nissan and Mitsubishi established a partnership with rechargeable battery manufacturers to develop the next generation batteries.

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Based on know-how accumulated in the material industry, energy and chemical companies are also stepping up efforts to advance into the rechargeable battery market. LG Chem was selected as the rechargeable battery supplier for GM’s electric car ‘Volt.’ Start-up companies such as A123Systems and Ener1 are also actively participating in the next generation rechargeable battery market.

(2) Partnership and Strategic Alliance

In a move to increase their dominance in the rechargeable car battery market, companies have chosen to form partnerships and strategic alliances. Japanese car makers, in particular, are eager to form a partnership with rechargeable battery manufacturers. The merges will offer a win-win solution to both sides as car makers are able to secure a stable supply of rechargeable batteries and battery manufacturers are able to secure large orders. Figure 1. Partnership Cases between Car Makers and Rechargeable Battery Makers

Source: Announcements and press releases made by each company.

Car makers in the US and Europe are also developing green cars through strategic alliances with rechargeable car battery manufacturers. GM decided to use batteries by LG Chem, Ford Motor, which is planning to release a plug-in hybrid car in 2012, picked Johnson Controls-Saft as its partner and recently BMW announced plans that it will receive an exclusive supply of rechargeable batteries by SB LiMotive. 5

Auto parts companies are also seeking synergy effects by forming partnerships with rechargeable battery manufacturers. Bosch, the world’s biggest car parts manufacturer signed a deal with Samsung SDI, the world’s second largest producer of lithium-ion batteries to form the 50:50 joint venture, SB LiMotive. US Johnson Controls set up Johnson Controls-Saft, a joint venture with French battery producer, Saft. (3) Competition between Countries The current rechargeable battery market for mobile IT devices is dominated by three South Asian countries i.e. Korea, China and Japan. However, as the application of rechargeable batteries expands, many countries including the US will become involved, creating a fierce battle for market leadership ① US : Efforts made by the government and the private sector to enhance competitiveness The Obama administration aims to reconstruct the US automobile industry through the promotion of green cars. The US government set up a plan to provide 1 million plug-in hybrid cars by 2015. Therefore, it is essential for the US to strengthen competitiveness in the rechargeable battery industry, which is a core component of these environmentallyfriendly cars. In fact, the US government allotted US$2.4 billion for the development of a cutting-edge battery in an effort to boost the industry. Michigan, the battered home state of the US automobile industry, is seeking an opportunity to resurrect itself in the rechargeable battery industry by providing various tax breaks and attracting investments. In the private sector, efforts are also being made to promote the rechargeable battery industry. Now, a group of 14 firms (including 3M and Johnson Controls) have joined forces and formed the ‘National Alliance for Advanced Transportation Battery Cell Manufacture’ which will create joint R&D and manufacturing centers. ② Japan: Concentrating all efforts at a national level for the development of the new generation of batteries Japan is geared to improving the competitiveness of the new generation battery industry. Recently, Japan initiated a new project to develop a new generation battery which will enable a car to drive three times the current distance by 2020. The government

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earmarked a total of 21 billion yen for this project over the next seven years and pulled together 22 institutions, including car makers, rechargeable battery manufacturers and university R&D centers. Table 3. Participants of the Joint Development of a Next Generation Battery

Companies & Institutions Toyota, Nissan, Mitsubishi, Honda Technical Research Institute, Toyota Central Research & Car Makers(5) Development Labs Battery Manufacturers(7)

GS Yuasa, Sanyo Electric Co., Panasonic, Hitachi Maxell, Shin-Kobe Electric Machinery, Mitsubishi heavy industries, Hitachi Kyoto University, Tohoku University, Tokyo University of Technology, Waseda University,

Universities(10)

Kyushu University, Ritsumeikan University, High Energy Accelerator RESEARCH ORGANIZATION, National Institute ofAdvanced Industrial Science and Technology, etc.

Source: "「All Japan」Development of a Next-Generation Battery." (June 11, 2009).『Japan’s Economic Newspaper』.

③ China: Narrowing the technological gap with industrial countries and securing natural resources The Chinese government is developing battery-related technologies and also stepping up its efforts to enhance the competitiveness of local battery manufacturers. The government included the development of rechargeable car batteries in the ‘863 program’ also known as the ‘state high-tech development plan.’ And in early 2000, the government indirectly supported Chinese battery manufacturers by requiring that IT products produced in China must use local rechargeable batteries. Although China has the world’s third largest lithium reserve, the core component of rechargeable batteries, the government has taken on a resource diplomacy strategy toward Bolivia which has half of the world’s lithium ion reserve, in a move to secure more lithium.

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3. Implications and Suggestion (Success Strategy)

Technological innovation is essential to gain the upper hand in the next generation rechargeable battery industry. Current rechargeable car batteries still have weaknesses such as limited driving distance, expensive price and safety problems. The possible solution to these problems is the technological improvement of the four main materials in rechargeable batteries; positive electrodes, negative electrodes, electrolyte and separation membrane. Securing lithium, the core material in rechargeable batteries is important. If the demand for rechargeable batteries surges, securing lithium will likely be an important task for battery manufacturers hence Japan’s and China’s resource diplomacy toward Bolivia.

Securing large demand via strategic alliances with global car makers is also important. Failure to secure large demand will mean having to withdraw from the competition. For example, Toshiba succeeded in the commercialization of the lithium-ion battery for mobile IT devices following Sony but failed to secure a large demand, finally having to withdraw from the market in 2004. This indicates how important it is to realize the economies of scale at an early stage. Based on quality and price competitiveness, battery manufacturers should obtain large orders from various car makers.

Finally, finding a new business model is vital in promoting the rapid growth of the green car market. To boost sales of expensive green cars, subsidy programs or leasing models would be ideal. To solve the problem of the long recharging time, replacing the worn-out battery with a charged one at charging stations should be considered.

The writer is a research fellow at Technology and Industry Department, Samsung Economic Research Institute. Inquiries on this article should be addressed to [email protected].

Copyright © 2009 Samsung Economic Research Institute. All rights reserved.

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