It's Shocking: Electric Car Batteries in Short Supply

Late last month, Ford Americas President Mark Fields said that problems with nickel-metal-hydride battery supplies could hinder the number of 2010 Fusion Hybrid cars the company will be able to produce. “We are constrained by the amount of components, including batteries, that the supply base can provide us,” he said.

(Later, the company clarified that it would double its battery volume for the new hybrids, and if the customer demand is there “we will work with our supplier partners to meet the demand.”)

Supply problems are particularly acute for the lithium-ion packs that will go into the next generation of plug-in hybrids and battery-only electric vehicles. And buying American is even more difficult. Asian manufacturers are far ahead in the lithium-ion race, partly because of government subsidies.

Charles Gassenheimer is the CEO of Ener1, a leading American lithium-ion supplier. The company’s EnerDel subsidiary has a $70 million contract to supply batteries for Norwegian manufacturer Think Global. But that deal has been held up as Think works on short-term financing to emerge from bankruptcy.

Ener1 has other customers, including what Gassenheimer describes as a “large European carmaker,” but despite enviable battery technology it is in a difficult environment. “We need purchase orders to built plants to produce batteries in volume,” he said. “And the carmakers don’t want to give us purchase orders until we have the plants.”

The incoming Obama Administration has announced the goal of producing a million plug-in hybrid vehicles, supposedly with domestically produced batteries, by 2015. With that in mind, Ener1 has applied for $480 million in low-interest federal loans from the $25 billion Advanced Technology Vehicle Manufacturing Incentive Program, part of the 2007 energy bill.

“The government has to help,” Gassenheimer said. “The Japanese government has invested $100 billion over the last 20 years to build not just batteries but the supply chain. That’s why they’re the leader. If the U.S. wants to have a battery manufacturing capacity going forward, it’s absolutely crucial that we start putting money into this now.”

With the $480 million, Gassenheimer said Ener1 would double the capacity of his company’s Indiana-based battery plant by 2011 and build a second, much larger plant there by 2015. Without federal funding, he said, the company might choose to expand in Asia instead of the U.S. In November, Ener1 completed the $50 million purchase of a Korean battery maker with a 200,000 square-foot facility that could be transitioned to making automotive batteries.