NEW YORK ( TheStreet) -- The global push for fuel economy has prompted a growing gravitational pull towards electric vehicle cars, prompting the investment community to increasingly consider the makers of rechargeable lithium batteries for these cars as an investment opportunity.

For the moment, nickel-hydride batteries are more commonly found in electric vehicles, but in theory, lithium batteries may eventually become the power source of choice. According to leading auto parts supplier Johnson Controls ( JCI), which has been growing its lithium battery business, lithium batteries are 30% smaller, 50% lighter, and three to four times more energy dense than nickel-hydride batteries. Furthermore, lithium lasts longer and is two to three times faster to recharge, the company says.

Pike Research forecasts that the market for lithium batteries for transportation will grow to nearly $8 billion by 2015 from $875.6 million market in 2010. More importantly, as manufacturing efficiencies improve and access to lithium expands, the cost of lithium batteries will fall by a half between 2010 and 2015 to less than $500 per kilowatt hour, according to Pike Research.

A number of companies in the lithium battery business have been working around the clock to position themselves for the expected expansion of the electric car market. Here we take a look at those who took a beating in 2010....


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Ener1 (HEV) Year-to-Date: down 33%.

Ener 1 Market Cap: $691.4 million

For the third quarter ended Sep. 30, Ener1 reported widened net loss of about $26.9 million, or 18 cents a share, compared with net loss of about $15.8 million, or 14 cents a share the year before. The loss was worse than expected; Wall Street was calling for loss of 10 cents a share. Net sales increased 113% to $17.3 million from net sales of $8.1 million the same time last year, but fell below the consensus target of $20.2 million. Ener1 develops compact, lithium-ion powered battery solutions for the transportation, grid energy storage and consumer markets.

Based on the third-quarter announcement, Barclays Capital analyst Vishal Shah lowered his fourth-quarter revenue expectation to $24 million, from $36 million. On average, the Street is calling for fourth-quarter revenue of $24.3 million vs. actual revenue of about $11 million the year before. Shah has also lowered his shipment expectations to 600 packs shipped to electric carmaker Think and 30 packs for Volvo's electric vehicles, compared with the previous estimate of 1,000 packs to Think, 100 packs to Volvo, 200 packs to Japan and 100 packs to other customers.

Shah has an equal weight rating on the stock and $5 price target for it. Stifel Nicolaus analyst Dilip Warrier also has a hold rating on the stock. Goldman Sachs analyst Mark Wienkes has a neutral rating on it.

Major cash burn continues to be a problem for the company as it builds up production capacity. As a result, the company has resorted to additional equity financing, diluting the value of shares for existing shareholders. Just in September, the company announced an agreement with its principal shareholder, Ener1 Group, for the purchase of common stock and warrants for $20 million, consisting of about 5.7 millions shares of common stock and 2.4 million warrants. In June, the company said it was receiving a $65 million equity injection from Ener1 Group though the purchase of about 18.7 million shares of common stock and 8 million warrants.

A few days before its third-quarter call, the company said that it had signed a $40 million supply agreement with a wholly-owned subsidiary of the Russian Federal Grid Company for bulk energy storage program for a nation-wide energy grid upgrade plan. Another milestone for the company was the announcement in May of the signing of a joint venture (JV) agreement with the electric vehicle division of Wanxiang, the largest "tier one" auto parts producer in China.

"Ener1 has achieved some significant positives this year, including ... a JV with large Chinese supplier Wanxiang, signing a supply contract with Volvo, and signing a meaningful grid storage contract with Russian Federal Grid," Deutsche Bank analyst Dan Galves said in a report. The share price, however, has been held back by meaningful dilution from substantial capital-raising in 2010." With a price target of $5.50, the analyst has buy rating on the stock.

In an equity research report, Wunderlich Securities analyst Theodore O'Neill said investors seeking pure play stocks on emerging technologies in the domestic lithium-ion battery business can focus on Ener1 ( HEV) or A123 Systems ( AONE), but notes that they're facing numerous challenges. "We previously highlighted how expensive lithium-ion batteries are and that costs need to be cut in half to further the adoption of electric cars," he noted. O'Neill has a hold rating on the stock.


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A123 Year-to-Date: down 61.2%

A123 Market Cap: $903 million

Despite a strong pipeline in the works, A123 has been hitting road bumps along the way.

Craig-Hallum analyst Robert Brown calls them "growing pains," and maintains a buy rating on the stock.

A123 reported third-quarter net loss ended Sept. 30 of $43.7 million, or 42 cents a share, based on 104.7 million weighted average common shares outstanding, compared with net loss of $22.8 million, or $1.78 a share based on 12.8 million weighted average common shares outstanding, the same time last year. Revenue for the third quarter of 2010 was 11% higher to $26.2 million, compared with $23.6 million the same time last year. Bottom line loss was wider than expected due to commercial production start-up costs -- problems which management said was largely resolved, while top line growth was higher than expected.

Analysts, on average, expected net loss of 30 cents on revenue $25.9 million. The company had cash and cash equivalents of $301 million at September 30, compared with $353 million at June 30, as it expanded capacity. The decrease was a result of continued investments to increase its worldwide manufacturing capacity and global operations, A123 said in a Nov. 9 press release.

On the same day, the company announced it has been selected to develop battery packs for a new, 2012 model year electric passenger car from Shanghai Automotive Industry. The company currently also has deals with Navistar ( NAV), Fisker and BMW.

Two weeks later, A123 said its chief financial officer Michael Rubino would be leaving the company effective Jan. 14 to join a Boston clean-tech startup company. Deutsche Bank analyst Dan Galves, who rates the stock a buy, isn't surprised by Rubino's move, saying that it's consistent with his career history, and doesn't think it will impact the company because Rubino didn't have an operational role and wasn't significantly involved in the pursuit of new businesses. "We also believe this change presents an opportunity for AONE to find a CFO that can better share the investor communications role with the CEO."

RBC analyst Stuart Bush, who has an outperform rating on the stock, said in a report that the sudden resignation of the CFO, without the announcement of a successor, coupled with OEM customer delays and the resumption of a patent lawsuit the company spoke about during its third-quarter call would add overhang on the stock.

Commenting on the third-quarter call, ThinkEquity analyst Colin Rusch, in a report, said that despite the uplifting Shanghai Automotive news, investors would likely be more fixated on management's announcement about its automotive OEM customers having to delay some car launches from the fourth quarter to 2011.

"We are not surprised that supply chain issues are surfacing for new products from auto manufacturer s given the variety of new components in these vehicles, but we would expect some investors to grow impatient waiting for a revenue ramp that has the potential to be pushed out further," Rusch said. The analyst, who rates the stock a hold, noted that management said the company is nevertheless ramping up production capacity on schedule to be prepared for the launches.

Goldman Sachs analyst Mark Wienkes has a neutral view of the stock. He said although the company is demonstrating cutting-edge technology and fast-paced capacity expansion, this cash-burning entity will likely need more capital than expected amid the expected delay in revenue ramp up.


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Advanced Battery Technologies ( ABAT) Year-to-Date: down 4%

Advanced Battery Technologies Market Cap: $266 million

Despite Advanced Battery Technologies' (ABAT) increased lithium battery sales and growing influence in the electric scooter market -- there's a lively market for electric scooters outside the U.S. -- shares of the company have dipped year to date as ABAT continues its efforts to remove itself from the shadows of its peers.

This maker of rechargeable lithium batteries and electric vehicles reported that third-quarter net income increased 118.8% year-over-year to $11.1 million, or 16 cents a share, from $5,086,021, or 8 cents a share in the year-ago period. For the quarter ended Sept. 30, ABAT generated revenue growth of 46.4% to $25.9 million from $17.7 million the same time last year, driven by its recently-acquired electric vehicle business. At the end of April last year, ABAT said it completed the acquisition of Chinese electric vehicle maker Wuxi Angell Autocycle for RMB 70 million or $3.64 million.

For the nine months ended Sept. 30, the company reported $74.3 million in cash and cash equivalents vs. $33.8 million the same time last year. As of Oct. 31, the company had on record battery backlog of about $41.6 million.

Analysts, on average, had expected earnings of 12 cents a share on revenue of $27.5 million. Revenue fell short of Olympia Capital Markets' estimate of $28 million, but gross profit margin of 53% was notably better than the 41% Olympia had projected.

In an equity research report, Olympia analyst Paul Resnik says that the higher margins reflect a shift in product mix towards medium to large capacity batteries and electric vehicles from lower-margin smaller batteries. The analyst also noted that the higher average selling price per electric vehicle plus reduced operational costs also greatly helped margins.

"While most emerging battery and electric vehicle companies are short on revenues and long on losses, Advanced Battery's revenues and earnings are growing rapidly," Resnik said when he initiated coverage of the stock in October. "Nonetheless, with, as yet, no imminent tie in to the four-wheel automotive market, the shares have thus far failed to generate the excitement and resulting valuations of other lithium-ion battery companies," he said in a note.

Still, Resnik believes that the company will attract growing attention as it begins to reap the real benefits of its production upgrades and continues to benefit from its electric scooter business through the acquisition of Wuxi Angell Autocycle. "While so much of the world awaits the elusive electric car, the fact is, a lot of the rest of the world is riding around on electric scooters. In Asia, it's a very successful and growing business."

On Nov. 30, the company announced that it was raising $30 million in capital through the issuance of 7.5 million shares at $4 a share to institutional investors. It was also issuing for investors warrants to buy up to about 3.8 million shares of common stock, which if fully exercised, would provide an additional $15 million in gross proceeds to the company. ABAT said it would likely use the proceeds for acquisitions and expansion of the company's battery manufacturing facility.

A sharp sell-off coincided with the announcement as stock concerns arose.

"After a strong third-quarter ... the stock reflected the good news; and they decided to raise more money, and that disappointed some people. If they can make an acquisition half as successful as the last one, the concern about dilution will abate," Resnik told TheStreet.

-- Written by Andrea Tse in New York.

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