Already volatile lithium-ion battery market heats up even more

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By Brian Warshay

Lithium-ion (Li-ion) battery maker Boston-Power (B-P) recently let go several top executives, including its CEO, finance chief and marketing vice president in preparation for $125 million of new private equity funding from China, led by GSR Ventures with support from existing investors Oak Investment Partners and Foundation Asset Management.

B-P already has manufacturing facilities in Asia and now plans to establish a research and development (R&D) and electric vehicle (EV) battery engineering facility along with a 400 MWh Li-ion battery cell manufacturing facility in China by the end of 2012. Though some R&D and other services will remain in its Westborough, Massachusetts offices, B-P did state that "The company is reallocating its global resources." This additional funding is more than a 60% increase to the $200 million in financing B-P has raised since its founding in 2005, though it has not yet turned a profit.

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This news comes alongside a significant EV partnership announcement from B-P with BRABUS and Protean Electric at the Frankfurt Motor Show, where the team revealed two new BRABUS EVs based upon the Mercedes-Benz E-Class featuring Protean Electric's in-wheel motors and B-P's 1.2 kWh liquid-cooled Swing Medley battery module.

The dismissal of these three top executives indicates that GSR Ventures intended to take over a significant role in the company's management, a rumor confirmed when GSR placed their Managing Director, Sonny Wu, in the role of chairman of the board of directors. This move aims to broaden B-P's market coverage into the transportation sector, where it already has smaller contracts supplying Saab's 9-3 ePower EV sedan with a 35.5 kWh battery pack and partnerships for neighborhood-electric and passenger vehicles in Europe and China. Though bad news for the individuals who were let go, this substantial investment could be enough to allow B-P to significantly ramp up its manufacturing capabilities, a goal that B-P has highlighted.

This action exemplifies the volatility of the Li-ion market and the focus on cost reduction. The Li-ion market is no stranger to shakeups of this nature, including Panasonic's acquisition of Sanyo, the shutdown of Imara, and Dow's acquisition of High Power Lithium, all in late 2009. As Li-ion companies without large-scale manufacturing capabilities or partnerships struggle to compete with the larger players in the market, it is likely that companies with a promising technological or cost-reduction advantage – but a lack of market traction – will look to license their technology or be acquired before being forced to sell off their intellectual property when cash dries up.

Brian Warshay is a research associate for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.

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