"The lithium battery business could become very large depending on the market's acceptance of electric cars and hybrids, how quickly battery costs can be lowered and the extent of government subsidies," Wunderlich analyst Theo O'Neill says. Under the heading of "electric car acceptance," General Motors ( GM) has raised its planned production rate of plug-in hybrid electric Chevrolet Volts to 60,000 a year by 2012, from the initial planned production rate of 30,000 a year, according to D.A. Davidson analyst Avinash Kant, who cites industry sources in an equity research report. General Electric ( GE) recently announced that it will buy 25,000 electric vehicles by 2015 -- almost half of them from GM, including the 2011 Chevy Volt.
NEW YORK ( TheStreet) -- As electric car trends continue to gain momentum in 2011, investors are desperate to learn what's in store for makers of the rechargeable batteries that will be powering them.
VLNC) will find a favorable resolution for its intellectual property disputes, and no guarantee it can lower costs and expenses to make its products more affordable or stay competitive amongst peers with larger assets, he sees "accelerated" market adoption of the company's products due to its reliable technology. Fleets, including those of transit buses -- one Valence customer group -- require reliable technology to deliver "on time" services, Lew pointed out. MDB Capital analyst Jon Hickman tells clients that though Valence's fiscal 2010 revenue of $16.1 million was lower than he had expected, he's encouraged by the company's recent order trends and management's comments about its large and growing backlog of orders.
SQM) bears believe the company faces possible oncoming pricing pressures in its lithium segment, owing to the possibility that Australian miner Orocobre could add as much as 40,000 metric tons of lithium production over the next several years. Morningstar also notes that SQM has in the past resorted to more expensive energy sources during natural gas shortages in Chiles. "This situation is expected to continue, eating away at the company's profits." Potential SQM bull scenarios highlighted by Morningstar include a surge in lithium prices owing to strong demand for lithium batteries in the electric vehicle space, and the usage of lithium-aluminum alloy in next-generation airplane models. "We predict SQM will maintain its market share leads," Morningstar analyst Jeffrey Stafford says in note. "However, this is not a foregone conclusion, given that the company will always be susceptible to irrational pricing in all of its markets." S&P analyst Efraim Levy estimates that Johnson Controls ( JCI), which specializes in auto interiors, building efficiencies and vehicle batteries -- especially lead acid batteries, but also increasingly lithium batteries -- will see revenue rise by 10% in fiscal 2011, owing to an increase in vehicle sales and production in the U.S. and most other regions. However an increase in raw material costs and pricing pressures from customers could offset these positive trends, he said. In a note, Morningstar analyst David Whiston said Johnson Control's heavy investment in lithium ion batteries and its purchase of the battery business of auto parts supplier Delphi -- the same one that helped Delphi build a presence in China -- will contribute to growth over the years. However, it's still unclear whether Johnson Controls will ever become a leader in the emerging lithium battery market, Whiston says.
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