Ener1 Wanxiang partnership can pay off in market access and IP protection

I recently wrote a column for auto163.com, a Chinese-language automotive website, about how China and the U.S. could both be winners in the race to develop the electric vehicle sector.  http://alyshawebb.blog.163.com/    Well, a fine example of that just fell right into my lap—the joint venture between battery maker Ener1 Inc. and Wanxiang Group.  http://www.ener1.com/?q=content/ener1-press-releases

Talking with Tom Goesch, president of the transportation group at Ener1, made me realize the win can be on several levels—both market access and intellectual property protection.

In January, battery maker Ener1 Inc.  www.ener1.com of New York and Wanxiang Group www.wanxiang.com of Hangzhou, a city in the east China province of Zhejiang, agreed to form a battery joint venture in China.

Wanxiang chairman Lu Guanqiu and Ener1 chairman and CEO Charles Gassenheimer shake on a deal to build batteries together in China.

Besides being one of China’s largest producers of universal joints, bearings, and CV joints, Wanxiang also produces electric vehicle batteries and entire electric vehicles.  The Ener1 joint venture is with the Wanxiang Electric Vehicle Co. Ltd., a division of the Group. http://www.wanxiang.com/Wanxiang%20EV_general.pdf

“We are putting our entire intellectual property portfolio into this,” Tom Goesch, president of the transportation group at Ener1 told me. “In particular our experience in building large scale battery packs.”

Goesch, president of Ener1's transportation group, thinks having a strong Chinese partner is the best protection again intellectual property theft.

What!?! Isn’t he worried that his intellectual property will be stolen?  Nope, said Goesch. “We feel the strategy of having a partner like Wanxiang, a China-based company, will provide us the best protection we can find. Wanxiang has all the reason in the world to protect that intellectual property.” 

That assumes that Chinese companies have more than just cheap labor to contribute to a joint venture.  Wanxiang brings both technology and connections to important customers to the partnership.

Wanxiang has been converting buses into electric vehicles since around 2006, said Pin Ni, president of Wanxiang America. It already buys some components from Ener1, and Wanxiang America is working with Ener1 here in the U.S., he said. The joint venture is a positive addition to that existing cooperation, said Ni.

“It’s better that we can join together to grow the market,” he told me.

The joint venture will produce lithium ion batteries aimed– initially at least– at China’s electric vehicle fleet market, said Goesch.  It may also export to other countries in Asia eventually, he adds.

“For the foreseeable future we will concentrate on China,” said Goesch. “There is so much opportunity in China right now.”

Indeed, China has millions of buses in its municipal fleets, an area in which Wanxiang has much experience, and many connections. As Goesch put it, “Wanxiang has done a lot of customer development.”

In 2006, Wanxiang formed a joint venture with the government of the city of Hangzhou to build and operate a fleet of fully electric buses. That has expanded. Now, Wanxiang has fleets in 24 cities in China.

Wanxiang also provided 50% of the electric vehicle fleet and 100% of the hybrid fleet for the Shanghai Expo, a world’s fair-type event held in Shanghai in 2010.

“We have built hundreds of vans and busses,” said Ni.

That fleet experience is why Ener1 is comfortable with Wanxiang’s technology, said Goesch. It has proven itself.  Ener1 also has sent some of its most senior technical people to Hangzhou,  and done an internal analysis. “We have more investigation to do, but we are confident they have good technology under their belts,” he said.

Still, U.S. battery technology is more advanced than China’s, said Goesch, because companies in the U.S. have been producing batteries longer. Chinese battery manufacturers still have issues with getting all the different elements in an electric vehicle to talk to each other, and with producing large-scale battery packs.

Wanxiang will need that know-how in the very near future. Because Wanxiang is located in the city, Hangzhou received a grant from China’s central government to build a fleet of electric buses, said Ni. There is a catch, though. Rather than converting buses with internal combustion engines into electric buses, which is what it has been doing, Wanxiang must build a fleet of 1,000 electric buses from scratch.

Ener1 provides batteries for a fleet of fuel cell hybrid buses in northern California and has teamed with Sweden’s Think  www.thinkev.com to provide electric drive trains for Japan’s postal fleet. That experience, combined with Wanxiang’s experience, should spell success. I’ll have to take an electric bus next time I’m in Hangzhou and see if it works!