Global Automakers to Develop Battery Capacity for Electric Vehicles—Analysis

Spate of Announcements

On Friday (23 May), Toyota announced that it was investing in two new battery plants via its joint venture (JV) with Panasonic to bring global production capacity to 1 million units by 2011, and importantly it announced its first foray into lithium-ion battery production (see Japan: 23 May 2008: Toyota Plans Two New Battery Plants in Japan). The announcement followed a string of similar declarations throughout the month from a wide array of vehicle manufacturers, some of which were distinctly sceptical about the true value of hybrid technology just a few years ago, such as Volkswagen (VW) and Nissan, the latter of which has so far been reliant on Toyota for its hybrid technology (see Japan: 19 May 2008: Nissan and NEC to Invest ¥12 bil. in Mass Production of Lithium-Ion Batteries) and is consequently tied to its rival for supply. Honda's announcement last week of its intention to compete in the gasoline (petrol)-electric hybrid-only segment head-on with the Toyota Prius was perhaps the most significant—battle will commence next year with the introduction of a 5-door, 5-seat model with styling based closely on the FCX Clarity on a scaled-down basis (see Japan: 21 May 2008: Honda to Unveil Hybrid-Only Model Next Year; Outlines FCX Fuel-Cell Launch).

Honda President Takeo Fukui expressed his readiness on Thursday (22 May) to compete with rival Toyota in marketing eco-friendly vehicles. "We will fight squarely with the Prius with a hybrid model to be launched early next year", Fukui told reporters. "Expanding our line-up further, we want to surpass Toyota in terms of image as an environmentally-friendly company", he said.

Outlook and Implications

This raft of announcements has come in response to a number of factors and marks the culmination of years of continuous development. However, two key developments have proved the tipping point for a number of carmakers. First, the controversial decision by the California Air Resource Board (CARB) to designate ”zero emission” status to plug-in hybrids, such as the high-profile Chevrolet Volt, overnight created an instant market for these vehicles (see United States: 31 March 2008: California Decision to Drive Plug-in Hybrid Programmes—Report), while it also recognised gasoline-electric hybrids. Secondly, advances in lithium-ion battery technology have been gathering pace, culminating in Daimler's announcement in March that it would incorporate a lithium-ion battery into its S400 BLUEhybrid sedan (see Germany: 3 March 2008: Daimler Claims Breakthrough in Lithium-Ion Battery Technology).

The decision by the CARB is in fact still under negotiation in some areas. The arguments are complex: on one hand California's approach has been seen in many circles outside the industry as understandable, given the decade-long absence of leadership from the U.S. administration of President George W. Bush to promote environmental causes or keep up with global trends regarding emissions, consumption, or ecological improvements. In the absence of such leadership, California took matters into its own hands, and over a dozen other U.S. states and one Canadian province followed suit. Now those states are seeing renewed interest at the national level—legislation that has been signed into law decreeing an increase in national corporate average fuel economy (CAFE) standards conflicts with the schedule set out by California and the coalition of states that have passed Californian-style regulations. However, CARB has regularly demonstrated a frightening lack of technical and business knowledge, compounding the frustration of the automotive industry. CARB has been quoted as saying that automakers can comply with the Californian regulations through slightly increased costs and "a little bit of creative repackaging". Such ambivalence towards consumer behaviour and business processes is a source of concern for automakers of all nationalities.

Nevertheless, CARB is widely recognised as one of the key drivers behind the recent raft of investments in battery technology, particularly by the major players in that state. The previously sceptical VW announced earlier this month that it planned to collaborate with Japan's Sanyo Electric company to build a new lithium-ion battery to be used in electric passenger cars. VW is planning to use the new battery design in its new range of hybrid and electric cars starting from 2012, most likely based on its forthcoming rear-engined range based on the Up! and Space Up! concepts. The two companies will collaborate on the battery technology, which provides more power and is lighter than conventional nickel metal hydride technology. VW also unveiled a diesel hybrid Golf concept at the Geneva Motor Show (Switzerland) in February and the model will go on sale in the next 18 months as the company's first production hybrid (see Germany: 29 February 2008: Geneva Motor Show 2008: VW Unveils Official Scirocco Images; Three New Fuel-Saving Models). California is vital to VW's ambitious U.S. strategy and the impending legislation in the state is the driving force behind VW's moves.

Nissan and NEC Corporation also announced their plans regarding lithium-ion technology earlier this month. The companies plan to invest ¥12 billion (US$115.4 million) over the next three years to mass-produce lithium-ion batteries in Japan. The JV will provide lithium-ion batteries to any automaker that wishes to buy them, as well as supplying Nissan for its planned plug-in electric model, to be launched in the U.S. and Japanese markets in 2010. Nissan hopes to have its own gasoline-electric hybrid vehicles ready for launch the same year. Under a new five-year business plan released along with the company's annual results, Nissan said that it would introduce an all-electric vehicle in the U.S. and Japanese markets in 2010 and launch mass-produced models in the global market during 2012 (see Japan: 13 May 2008: Nissan Announces Growth in Profitability for FY 2007/08, Warns of Difficulties This Year). Nissan, like VW and Mercedes, is a major player in California.

The effect of CARB’s decision is remarkable—one state in the United States has influenced the policies of many of the major players in the global automotive industry, Toyota and Honda notwithstanding, many of which would otherwise have remained absent, or at best only partially involved, in electric vehicles (EVs) and hybrids. These previously stoic players would have had little to do with what remains a technology with many flaws, were it not for the Californian legislation.

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