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A New Market for Battery

A New Market for Battery Start-Ups?

By Claire Cain Miller

A slew of start-ups are going into the business of developing batteries to power electric cars. Yet some have hit a wall when it came time to build prototypes and manufacture the batteries because American car companies were not interested in buying them.

(Credit: Stan Honda/AFP/Getty Images)

That changed Monday, when General Motors announced that it would open a factory in Michigan to produce lithium-ion battery packs to power the 2011 Chevrolet Volt, as Lindsay Brooke reported from the auto show in Detroit.

For now, G.M. will buy the battery cells it uses to build the packs from LG Chem of South Korea. But G.M.’s announcement is good news for American battery cell start-ups, said Jim Greenberger, who heads the clean-tech practice at the law firm Reed Smith and who organized an alliance of lithium-ion battery makers to help expand the industry in the United States.

“It means that there is going to be a demand for lithium-ion battery technology in the future,” he said. “The biggest, apparently smartest folks in the room really believe that this technology is coming, and coming soon. It is a sign there is potentially a huge market.”

Lithium-ion batteries are already used in laptops and cellphones. They are still unproven at a scale necessary to power cars, but the high-density, long-lasting batteries are the most promising candidate for electric vehicles.

Most lithium-ion batteries used today are manufactured in Asia, and many start-ups have said one of their goals is to start production in the United States. As Jeff Depew, chief executive of the battery start-up Imara, has said: “We don’t want to go from being dependent on Middle East oil to Asian batteries.”

American car companies will probably not manufacture batteries themselves, because that is a lower-margin, more capital intensive business than making battery packs, said Mr. Greenberger.

However, American companies must make the cells, he said, because “he who makes the batteries will make the cars.” Manufacturing the cells themselves “remains problematic, and if we do not get U.S.-made cells, we eventually may lose control of the pack business as well, and maybe the rest of the automobile industry,” Mr. Greenberger said.

Though G.M. and other car companies are not necessarily known for innovation, he said, “the American economy will always find some of its greatest strength in start-up companies and entrepreneurs who come up with new technologies and manage to get them adopted.”

A New Market for Battery

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