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Chinese government lures battery maker Boston Power to China. A new strategy?

October 15, 2011

Hey, wadda ya know. It appears the Chinese government is looking overseas for good battery technology. And putting its support where its mouth is.

Does this herald a new electric vehicle sector development strategy for China? Will we see more support from the Chinese government for foreign companies with electric vehicle technology? Is this a way to get some technology without trying to force foreign automakers to fork it over?

In late September, Boston Power, a Massachusetts-based producer of lithium-ion batteries, announced it had received a US$125 million investment, and that it was moving to China.

The investment includes cash from private investors and support from the Chinese government. The deal was arranged by GSR Ventures, a venture capital firm with offices in Silicon Valley and Beijing.  GSR managing director Sonny Wu told me via email that the Chinese government is providing “significant support for the company.” He wouldn’t elaborate. According to the press release, the government’s investment came in the form of grants, low-interest loans, and financial and tax incentives.

The money will be used to build a plant near Shanghai with capacity of 400 megawatt hour of lithium-ion battery cells per year cells by the end of 2012, more than tripling Boston Power’s production capacity. To put that in perspective, that equals batteries for some 20,000 passenger cars.

I talked to Boston Power founder Christina Lampe-Onnerud about the big move for her company.  Lampe-Onnerud (below) is now Boston Power’s international chairman. Sonny Wu of GSR Ventures is the new chairman.

Lampe-Onnerud figures China is Boston Power's future.

Why would the Chinese government chose to invest in foreign battery company given that there are so many battery makers in China, I asked  Lampe-Onnerud? “It was a merit-based award,” said Lampe-Onnerud. “The technology is rock solid. Our stuff works.”

Is Lampe-Onnerud worried about a glut of batteries on the China market? Overcapacity, that is? “I think there is always a huge need for high quality battery,” she said. “I think there is an overcapacity of cheap batteries,” she said. I guess not.

Boston Power claims its lithium-ion battery delivers the holy grail of EV battery technology: High energy density, long life, fast charging, and safety. Oh, and environmental sustainability. Who could ask for more?

Why China, I asked Lampe-Onnerud? She said: “We recognize that China is taking the lead in transportation. We are extremely well positioned in that; we are outperforming our competition in transport.”

Okay, but isn’t she worried that Boston Power’s intellectual property will get nicked by a Chinese competitor who will then start producing similar batteries? “I’m not particularly nervous,” said Lampe-Onnerud. As a young company, Boston Power’s number one intent is to grow, she added.

Boston Power wanted to grow in the U.S., but its request in 2009 for $100 million in federal funding was rejected. Why, I asked? “Our company was maybe a little young” to get an award from the U.S. government, said Lampe-Onnerud. Boston Power’s focus in China will be on batteries for vehicles, said Lampe-Onnerud.

She wouldn’t say if it would focus on passenger cars or commercial vehicles. And though she said it is already talking to Chinese companies about using its battery, Lampe-Onnerud wouldn’t reveal any names. It will make an announcement regarding its customers in China within the next six months, she said.

This is not Boston Power’s first foray into China. It has a trading company in Shenzhen, said Lampe-Onnerud. She has long seen China as a destination for Boston Power. Though she doesn’t speak Chinese, and had never been to China before, in 2005 Lampe-Onnerud went to Shanghai to visit several battery manufacturers to try to talk them into doing a test run of her battery. One of the companies finally agreed, and Lampe-Onnerud paid for the run with her own money. When the Shanghai company wouldn’t agree to large-scale production, she produced the battery in Taiwan, said Lampe-Onnerud. The Shanghai battery maker has gone out of business, she said.

Lampe-Onnerud is ballsy and that impressed me. But there are still many questions surrounding Boston Power. Is its technology really as good as she claims? Who are these Chinese customers? What, exactly, is the Chinese government’s interest in Boston Power? Is it offering the same deal to other foreign companies?

I’ll sniff around when in China in November. Stay tuned! .

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