Polypore sells into the traditional lead acid battery space and into the lithium ion market for all electronics, but it's the electric car market outlook that Johnson focuses on in saying that investors are missing the carnage to come -- his report is titled "There Will Be Blood."
A123 Systems (AONE) shares have declined 90% since its IPO three years ago. It remains beholden to the ramp from electric car maker Fisker. A123 Systems has burned through a mountain of cash and continues to lose money on every battery it sells. While negative gross margins are typical of high-risk emerging industries, the cash issues at A123 Systems have made it a terrible investment.
Recently, when Fisker announced a delay in its ramp, Wunderlich Securities analyst Theodore O'Neill described it as a positive for A123 because it meant the battery company wouldn't have to spend as much cash in the short-term, a sign of just how tight the cash situation is.
A123 peer, Ener1 (HEV), last year embarked on a shift in strategy as its business fortunes flailed, with its CEO saying the electric car market would take years to be profitable and it would instead focus on energy storage opportunities in the utility space. The Ener1 CEO was later ousted and the company now trades as a pink sheet.Sales of GM's Volt have recently stalled. In 2011, the Chevrolet Volt sold 7,621 units, moderately short of the 10,000 goal. For 2012, Chevrolet's goal is to sell 45,000 Volts in the U.S., and 15,000 internationally. Medis reports are now suggesting that U.S. sales of the Volt have stalled at a relatively low level near 1,000 units per month, and dealers are being asked to take more Volts than they believe they will be able to sell in early 2012. At Fisker, the reining in of expectations has been a constant: Fisker has cut its build plan for the Karma to 10,000 units in 2012, down from 20,000 at the beginning of 2011, from 15,000 in November, and from 12,000 in late 2011. Calling the "best" short in alternative energy is a matter of timing. For example, Johnson's call on solar supply exceeding demand was too early in 2010, but by 2011, it played out and reaped rewards for shorts that held their conviction through the last solar boom of 2010. Stifel analysts recently took on the issue of oversupply in a report on the lithium ion battery market. In noting the investment in the battery space, Stifel asked, "Will these investments create an oversupply situation that will inevitably create pricing and margin pressure across the EV supply chain? Over the near-to-medium term (2012-2013), we feel this is unlikely; however, given the 35mn kWh of announced longer-term expansions, we do see a possible oversupply situation in the 2015 time frame depending on the slope of the inevitable increase in penetration rates of 'xEVs'. We also want to emphasize that unlike battery capacity investments, which tend to be large, lumpy and years ahead of demand, lithium ion separator capacity ramp timing is matched to underlying vehicle production ramp timing, which should ease concerns of a looming oversupply of separator capacity." -- Written by Eric Rosenbaum from New York.
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