GM will invest $30m in the Michigan LG Chem/Compact Power battery plant which will assemble lithium-ion cells for its Chevy Volt. Of course the actual cells are made in Korea, a fact which make the Volt’s many taxpayer subsidies less than exclusively patriotic affairs. But fear not, American taxpayer! Korean subsidies make your subsidies go farther! GM’s Bob Lutz reveals to MLive that one of the reasons GM picked the Koreans over homegrown A123 Systems was because “LG Chem has massive support from the Korean government in terms of a whole research campus was paid for by the Korean government because Korea recognizes that advanced battery technology is a key component of the country’s competitiveness.” Hint, hint. Since LG Chem is farther along with prismatic (flat) cells, we’ll all just have to live with the fact that our tax money is flowing through GM to foreign firms, although to be fair, A123 did its cell manufacturing in China. So much for “supporting domestic industry.” Anyway, in his announcement of the $30m investment, GM’s Ed Peper tells Reuters to forget any CadiVolt dreams. “We chose Chevy because we can’t be niche with the Volt,” explains Peper. “We have to make it a mass-production vehicle.” A $40k “People’s Car” which depends on foreign technology, and will lose money even with “government support” coming from all sides? Niche? Never.
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The road to the electric car is riddled with battery companies that couldn’t make it to the big leagues. Electro Energy. Cobasys. Altairnano. Valence.
Not because of lack of government support. But because you need to build a battery company on another market. Electric cars that run well on batteries are still years away. No basis now to build a company on.
LG and A123 have done okay because they build batteries for other things. And of course Panasonic and Sanyo lead the world in nickle metal hydride batteries. I would not count out these companies yet.
But it is wrong to think that we would have better batteries if the government supported domestic companies, or that these Asian companies succeed because of government support. Not true.
It is nice to see people pursuing electric cars, though. Tesla, Fisker, Project Better Place. The personal computer industry teaches us that we will reach success only by seeing a lot of failure. The failures we are seeing. That means we are getting closer to success.
I am normally a glass-half-empty type, but for some reason I have faith that the Volt can make it.
I expect a great deal of “Voltage” leading up to begging Uncle Sugar for another rock to go in the pipe by the February/March timeframe.
Unfortunately for the Volt, it will arrive at about the same time the cheap credit-markets are tapped out (again) from the coming inflation of the Fed’s balance sheet doubling in the past six months. That is an unfortunate development not in GM’s favor, and only a teeny-weeny bit of their making. Too bad.
The Volt will never see a showroom, and the $30 million plant will provide jobs only for the people who build it, because nobody will ever work there.
The only way the Volt will hit production is if the government buys them, because no clear-headed consumer is going to spend $40k on an economy car, and GM will never make money on this vehicle. There cannot be a business model that says this car is profitable.
I say:
Whatever deal GM has to do to make this car a reality…GO FOR IT!!!!
Just what domestic company produces Li-Ion batteries in substantial enough quantities for automotive use?
No matter who GM picked as a cell supplier, the cells would have been made outside the US. That’s why Michigan is trying to become the locus of battery research and production in the US.
This is what happens when a country ignores the need to have a diverse manufacturing base. Countries like Korea, India and China recognize that need. The US, on the other hand, has convinced itself that we can grow wealth with a service economy.
Would you like fries with those 16350s?
Just tell me the plant won’t be a union shop and I’ll still have some hope for this vehicle.
Ronnie Scheiber, do you mean 18650s?
You are right that no US company makes lithium-ion cells. It’s not for lack of trying. There’s a plant in Gainesville, Florida that was built 15 years ago and has had over 100 million dollars invested in it that will go to waste as Electro Energy fades away. Several companies tried to make a go of it with that plant. All failed.
Batteries are a brutal business. It’s not the governments in South Korea, Japan and China that have built the battery plants there and made them work. Their governments are no better than ours at industrial policy. It’s the companies.
To some degree, you are right that batteries have gone to other countries just like steelmaking, shipbuilding, and other heavy industries. But batteries have always been a difficult business, ever since the late 1800s when the first investors lost their shirts due to batteries not living up to their claims.
Electricity is strange. It can be generated 800 miles away and arrive in my house instantaneously. Yet it is very difficult to store. That makes electricity great for most things, but not for cars.
Good luck to Michigan if it gets in the battery business. I can’t think of any other industry that is more trouble than cars. But the battery industry is.
“But it is wrong to think that we would have better batteries if the government supported domestic companies, or that these Asian companies succeed because of government support. Not true.”
Do you really believe that if the Asian governments in question here had never invested money in their battery industry that those countries would still have leading edge battery manufacturing capabilities?
“Do you really believe that if the Asian governments in question here had never invested money in their battery industry that those countries would still have leading edge battery manufacturing capabilities?”
Yes, I do. I lived and worked as a lawyer in Japan for seven years. One of my better clients was Matsushita Electric (called Panasonic here). They are the world leader in nickel metal hydride batteries, and are not too shabby in lithium-ion as well. They told me from time to time that the Japanese government was more a hindrance than a help.
I am not as familiar with China, but I know South Korea pretty well. The story is much the same there. Only the governments will tell you that the governments are helping industry. Talk to the companies, and they tell you how the government is a big pain in the ass.
Sure, there are tax breaks for factories and the like, but we have those here as well. As near as I can tell, the battery industry in the US enjoys as much, or more, government largesse as in any other country.
And we should not discount two other big advantages US companies have. First, the government-supported university system we have here is phenomenal. With battery research, Rutgers University has done a great job. And of course MIT, the University of Texas, and some others have done good work too. Japanese companies have nowhere near the amount or quality of research in their universities available to draw on.
Second, our venture financing system works wonders. Companies like Firefly and A123 would never have a chance in Japan, South Korea or China. I know a great battery company in Japan, founded by Sony’s former top lithium-ion battery person, that has struggled to find funding. Continental finally invested in them, and they may still make it. But the lack of venture funding has put them well behind where they should be.
My experience is a bit anecdotal, so I may be wrong. But I do feel that the Asian battery companies have gained their dominance based on their own hard work, taking risks, and plenty of costly failures. (Plus of course the lower labor and other costs in China and to a lesser extent South Korea.) Not because of industrial policy, bailouts, or pork.
tesla deathwatcher,
Wasn’t Firefly funded by their parent company Caterpillar?
Yes, the technology was spun out of Caterpillar with the original people. But Firefly finished a Series C funding round last year with funding from Quercus Trust, Khosla Ventures, and Infield Capital. BAE Systems, Husqvarna, KB Partners, the Illinois Finance Authority, and the Tri-County Venture Capital Fund also invested in earlier rounds with Caterpillar.
Your question makes the good point that the startup environment in the US is not limited just to venture firms. Many companies also support startups with money and strategic partnerships. A123 has seen the same thing, with GE being a big investor.
I have oversimplified this issue. Of course foreign companies do have some advantages. The business environment in China, for example, is very unusual, offering advantages to battery companies along with disadvantages. China is still at heart a centrally planned, communist country after all. That can be a help to companies that enjoy government support. Many pollute with impunity, for example.
Still, I have to speak up when people talk about how great the government support is for Asian companies. I still remember back in 1980 when books like Japan As Number One, Trading Places, and MITI and the Japanese Miracle were all the rage. Looking back now, all that was laughable.
Things are tough all over. Especially the battery business. It’s brutal. Just ask Sanyo.
Thanks tesla deathwatcher…the pleasure of this site is still that we occasionally get someone to comment that has enough real knowledge to compare against people that just have real opinions.
OK, so if GM has minimized the cost of the cells by producing them overseas (US manufacture of them being impossible, anyway), and everyone knows that the cells are a primary cost driver for the vehicle, then how will they produce and sell the Volt profitably at a $40k price point?
Such a price will only attract Chevy groupies and tree-huggers, but not serious car buyers who want to maximize their buying power.
Alternately, GM will recognize this reality and force the US government to subsidize the vehicle through rebates and other taxpayer-funded measures. I’ve already read about a $5k government rebate, but that won’t be enough to motivate buyers, and I’m not in favor of such measures because I pay for them. This then becomes nothing more than an extension of the bailout plan. How about producing a car (any car) that the taxpayers don’t have to subsidize?