(GE, GM electric car story updated for GM and FedEx comments, Senate vote)
NEW YORK (
dove into the electric car market last week, announcing that it would purchase up to 25,000 electric vehicles from GM and other manufacturers between now and 2015. GE said 12,000 of the electric car vehicle orders would be for the GM Volt, and those orders would begin in 2011. The electric car purchases are for GE's corporate fleet and to be leased to customers, and it's a big shot in the arm for electric car sales making a dent in the U.S. corporate fleet market.
It wasn't entirely new news, however, as GE had said a few weeks ago that it planned to make a big electric-vehicle purchase. The implications for U.S. lithium ion battery makers aren't exactly clear either.
GE has a significant ownership stake in lithium ion battery maker
. The GM Volt, however, uses cells from LG's lithium ion battery company, Compact Power. The 12,000 Volt purchases, therefore, have no impact on A123 Systems' effort to penetrate the electric vehicle market, at least not immediately. However, it's not curious that GE wouldn't buy an electric vehicle fleet backed by A123 Systems' lithium ion cell technology, because there isn't an option at present in the mass-production market.
Theodore O'Neill, analyst at Wunderlich Securities, said that in addition to the Volt being LG lithium ion cell-sourced, the electric car platform that GM is using could continue to use LG's Compact Power for additional electric car models.
GE spokesman Jamie Lofton wrote in an email to
that "as OEM's expand their electric vehicle portfolios, A123 may be sourced for vehicles that meet GE fleets needs."
A123 said as much on its recent earnings conference call, when it noted that GE would be making a big purchase, but there wasn't an option yet for GE to buy that included an A123 lithium ion cell. Ben Schuman, analyst at Pacific Crest Securities, agreed that there might be an opportunity for A123 from the GE news, eventually.
"A123 could be named as supplier for vehicles included in the order down the road. GM has been vocal about having multiple battery cell suppliers," the Pacific Crest analyst said. He explained that the GM approach is unique in that the car maker produces the battery pack and system and is just sourcing cells, meaning that it can plug in any cell supplier to its platform. "They are not available today so I wouldn't take the news as an incremental negative that GM is going with vehicles with cells from another supplier," Schuman said.
A123 Systems competitor
also recently alluded to the GE electric vehicle plans, though its lithium ion technology is currently only available through Scandinavian car company Think Global models.
One problem that both lithium ion battery makers will face is alluded to in the Pacific Crest analyst's comment about the ease with which GM can source lithium ion cells for its existing battery system. The lithium ion cell technology could become a commodity by the time mass adoption rolls around, and any first mover advantage held by these U.S. companies will quickly be challenged by low-cost production from Asia, as has happened in several clean energy markets.
Another way of looking at the GE news is whether it's more publication relations than an actual boon for the lithium ion battery makers. The Wunderlich analyst O'Neill estimates that if GE buys 12,000 Volts, that equates to 3.5 million lithium ion cells. Wunderlich data indicates that the industry would need to reach the level of 150 million lithium ion cells for prices to come down to the point where mass adoption would be possible.
For the Wunderlich analyst, the GE news, at least at this point, is more public relations than big boost to the lithium ion battery makers.
Consider this: GE announced its intention to purchase 12,000 Volts beginning in 2011, yet GM's total production target for 2011 is 5,000 Volts, and retail dealers on both coasts are clamoring for the Volt. "This is going to be a back-end loaded deal," the Wunderlich analyst said. There are 600 dealers in the market awaiting Volt delivery and if each dealer got 10 Volts that would more than cover the entire 5,000 production target from GM for 2011.
GE spokesman Lofton answered this question in an email to
by reiterating that "the Volt purchase begins 2011 and the commitment is to purchase the combined 25,000 vehicles by 2015."
"GE will be lucky to get 1,000 Volts in 2011," O'Neill said.
The Pacific Crest analyst said the order backlog for the Volt is strong, and unless GM increases its production number GE won't be seeing most of these orders filled in next year. However, the initial production number isn't set in stone, and it wouldn't be surprising if GM took the initial production run up, the analyst added.
Indeed, speaking at
2011 Car of the Year
event on Tuesday, where the Volt was honored, GM chief of production Tom Stephens said, "If you look at where we were originally, in terms of what we thought the volume would be, we have stepped it up." Stephens declined to provide an exact production forecast though, and was quoted by
as saying, "To always have more demand than you can supply. They always say that's a good problem to have. That's the problem that we have right now."
The GM production chief also confirmed at the
event that LG Chem and its lithium-ion battery maker Compact Power would continue to supply batteries for the Volt under an exclusive six-year agreement.
In a more general sense, the GE decision to add a fleet of electric car vehicles can be read as good news for the lithium ion battery companies, as any signs of widespread adoption by corporations of electric cars should help the sector ultimately meets it goal of ramping production to a level where the price of batteries come down to a more reasonable level. In particular, moving into the corporate fleet market, where predictable patterns of travel exist, may help to mitigate the "range anxiety" that is associated with electric cars and the need to have re-charge stations.
GE isn't the only corporate player backing electric vehicles. On Monday, the Electrification Coalition, a lobby group for electric vehicle legislation, held an event in Washington D.C. where the keynote speaker was the CEO of
, who is pressing for tax incentives to support the purchase of electric car vehicle fleets by corporate America. In his comments, FedEx CEO Fred Smith called the electric vehicle the single greatest way to make American energy self-sufficient.
On Capitol Hill, Senator Majority Leader Harry Reid (D-Nev.) is hoping to get a procedural vote to the Senate floor on Wednesday concerning legislation that would include incentives for natural gas engines and electric cars. The latest move in the lame duck Senate would merely be a test to see if there are even 60 votes willing to work on some kind of clean transportation legislation.
-- Written by Eric Rosenbaum from New York.
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