Massachusetts Battery Firms A123Systems and Boston-Power Taking Different Roads to Auto Market

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a huge windfall from Uncle Sam in the form of a $249 million Department of Energy grant to build manufacturing facilities to produce its next-generation lithium-ion batteries in Michigan (where state officials announced in April that they would give A123 $100 million in tax breaks to expand there). The federal grant was part of $1.5 billion in stimulus money that the energy department awarded this month to companies to produce battery systems and components for hybrid and electric vehicles in the U.S. None of that money will go to Boston-Power, which had requested a $100 million grant for a project to retrofit a facility in Auburn, MA, to manufacture its own lithium-ion batteries for autos. (Boston-Power is waiting to hear about its application for a separate $100 million grant from the Department of Defense.)

“That was a fairly big blow for Boston-Power, and I think it’s going to be very hard for them to catch up on the automotive side, having already been so far behind in the game and faced with not just the A123s and the startups but also the large multinational firms,” said Jacob Grose, an analyst who follows the energy-storage industry for Lux Research, a technology research firm with offices in Boston, New York, and Amsterdam.

In a new analysis of battery companies competing in the automotive market, Lux estimated that A123—which is a private company in registration for an initial public offering—received about 20 percent of its $100 million in 2008 revenue from customers in the auto industry. (A123 has declined to speak with the press while awaiting its IPO.) The company, founded in 2001, is also making money from the use of its batteries in portable power tools, electric grids, and government-owned equipment.

Overall, A123 received a “positive” rating from Lux in the automotive category due to factors such as its existing business in the segment and partnerships with Chrysler and others. Lux gave Boston-Power a “wait and see” rating, since the company has yet to advance as far as some competitors in the auto market.

The Lux study did not name any other New England battery makers in the auto field, but other companies that ranked highly in the report included larger companies such as Korea-based LG Chem (which beat A123 early this year as General Motor’s choice to supply lithium-ion batteries for the plug-in electric Chevy Volt sedan), Japan’s Panasonic (NYSE:PC), and Milwaukee, WI-based Johnson Controls (NYSE:JCI). According to Lux, the hybrid and plug-in electric vehicle segment of the battery market will skyrocket from an estimated $551 million in 2008 to a whopping … Next Page »

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