What Will Demand Be for Lithium Batteries?

Source: Seeking Alpha, Mark Boslet  (7/28/10)

"When will the industry reach the battery makers' production levels?"


Makers of lithium-ion batteries are rapidly expanding their factories in anticipation of a ballooning market for electric cars. The trouble is, none of them can be sure what the demand will be.

Car makers have big plans for electrics. But it could take years for the industry to reach the production levels battery makers appear to be preparing to supply. General Motors, for instance, will make 20,000 Chevrolet Volts in 2011 and increase the production run to 30,000 in 2012.

For many battery makers, the consequence of long-term oversupply could be catastrophic. A flooded market will push down prices and send profits tumbling. Start-ups with innovative technology could find it hard to survive.

With electric cars starting to reach consumers later this year, the supply-demand debate was a key focus of the first day of the Plug-In 2010 conference in San Jose. The conference brought together some of the leaders of the business—and there was little agreement.

At this point, demand is not clear, says Roger Lin, director of product marketing at A123. The adoption of electric cars may be faster than the pessimists believe.

On the other hand, some projections suggest worldwide lithium-ion battery supply could be three times greater than demand. "The upsurge in domestic manufacturing has been a surprise for us," says Kevin Chen, director of business development at manufacturing-equipment supplier Applied Materials.

John Gartner, a senior analyst at Pike Research, says oversupply is possible. He projects that by 2015 the installed price of battery systems (including thermal management gear and other finishing equipment) will be cut in half.

Disclosure: No positions