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Take on quality of China’s battery cos depends on what you want from them, it seems

November 28, 2011

In mid-November I attended the EV Battery Forum in Shanghai. www.evbatteryforum.com  The event was great from a networking standpoint—participants included representatives from utilities, battery producers, battery materials suppliers, auto makers, and battery associations. They hailed from China, Hong Kong, India, Finland, and other countries. And, it revealed an interesting divergence in opinion on the quality of China’s domestic electric vehicle battery manufacturers.

Dr. Wang Ying (Sherry), deputy CTO of Shanghai Advanced Traction Battery Systems Co, SAIC’s battery joint venture with Massachusetts-based A123, http://tinyurl.com/7qhal9m  was a speaker. So were Dr. Tobias Giebel,  http://tinyurl.com/c9prgnx  head of the Volkswagen   Research  Lab in Shanghai, and Ray Bierzynski, executive director electrification strategy for General Motor’s China Group.  http://tinyurl.com/bv4st63

Their views of the quality of the local battery supply base were quite different, illustrating that a company can see what it wants to see in the China market. VW and GM, who aim to source batteries from China for their global operations, believed that China would produce world-class batteries in the not-too-distant future.  Wang was not so optimistic.

I agree that China will become a global supplier for the batteries that power  electric vehicles. But I don’t think it will be become the global source. Timing is important here. When will Chinese domestic battery producers be able to make world-class products? And how many companies will actually achieve that standard? And how many of those companies will be able to do it without a lot of help from foreign firms?

Wang Ying wouldn’t say batteries produced by China’s domestic battery manufacturers were not good enough for electric vehicles. What she did say, however, was that China’s battery companies were new to the new energy vehicle battery market and that “battery suppliers in China don’t really know vehicles.” The packaging is the real challenge for China’s domestic battery makers, said Wang without elaborating. In any case, the fact that SAIC chose to partner with a foreign battery company when China has more than 100 battery producers itself speaks loudly and clearly.

Meanwhile, Dr. Tobias Giebel had a much more sanguine view of China’s domestic battery producers. “We believe the future of battery cell sourcing is in China,” he said. Volkswagen http://tinyurl.com/bpl9dp8 is working closely with about 20 domestic battery producers in China to bring them up to Volkswagen’s global standards, said Giebel. VW figures it will have “real strong” suppliers in China within “a couple of years,” he told the conference.

When I talked to him during a coffee break, that sounded more like up to five years. But, Giebel confirmed his confidence in China’s domestic battery manufacturers in a later email exchange. “The supplier in China needs some time to catch up with the high level vehicle traction battery products in Japan and Korea,” Giebel wrote. “But they are on the way, and we are observing in these days first successes of the Chinese suppliers. Therefore we are optimistic that Chinese vehicle traction battery cells will become soon competitive.”

General Motors www.gm.com is also looking to source batteries from China for its electric vehicles. GM’s wholly-owned China Science Lab in Shanghai can test local batteries for quality, said Bierzynski. The batteries can be validated – that is, certified that they meet GM’s standards—at the Pan Asia Technical Automotive Co., or PATAC, the 50/50 design and engineering venture between GM and SAIC in Shanghai. http://www.patac.com.cn/ That means a battery made in China would have the stamp of approval for use in GM; s global operations. “We need a (battery) supply base. It is a good bet that will be here in China,” said Bierzynski.

So, does this mean the domestic electric vehicle battery companies in China will elbow out battery producers in the U.S. and Europe? Perhaps. Companies such as Ener1 www.ener1.com , LG Chem www.lgchem.com , and A123 www.a123systems.com are hedging their bets by forming partnerships with Chinese companies.

Of course, if the government actually passes a draft law it has circulated that would require foreign companies wanting to produce electric vehicles and key EV components including batteries in China to form joint ventures that are at least 50% locally-owned, then Chinese battery producers would have access to battery technology that they may lack, right? In theory, yes. But the Chinese government forced foreign automakers to form 50/50 joint ventures with local companies in order to produce cars in China and how many domestic automakers do you see producing world-class cars?

I predict the number of Chinese battery manufacturers able to produce world-class batteries will be very small. Most of China’s domestic battery producers will never make it there. So will China one day be the source of most of the world’s electric vehicle batteries? Maybe, but don’t count battery companies from the U.S., Europe, and other Asian countries out.

To hear another view on China’s EV future (which may or may not differ from mine; this is not an endorsement of the view that will be presented in this seminar), check out the live online seminar “The Green Dragon: Will China be at the forefront of the New EV Revolution?” Marc Norcliffe, a U.K.-based consultant who has been involved with China’s auto industry since 1996, will present live via the internet and cover the advent of China’s new energy vehicle industry (as alternative powertrain vehicles are known in China) from the industry, government, and consumer perspectives. For more information or to register, visit  http://tinyurl.com/7m2z7pv

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